Simplifying the ABC System: Equally Accurate Reduced ABC Systems Selected activities and other information are provided for Patterson Company for its most recent year of operatio
Cost Accounting
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Simplifying the ABC System: Equally Accurate Reduced ABC Systems
Selected activities and other information are provided for Patterson Company for its most recent year of operations.
|
Expected Consumption Ratios |
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Activity |
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Driver |
|
Quantity |
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Wafer A |
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Wafer B |
|
7. Inserting dies |
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Number of dies |
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2,000,000 |
|
0.70 |
|
0.30 |
|
8. Purchasing materials |
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Number of purchase orders |
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2,500 |
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0.20 |
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0.80 |
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1. Developing test programs |
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Engineering hours |
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10,000 |
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0.25 |
|
0.75 |
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3. Testing products |
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Test hours |
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20,000 |
|
0.60 |
|
0.40 |
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ABC assignments |
|
|
|
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$1,500,000 |
|
$1,500,000 |
|
|
Total |
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|
|
|
|
|
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$3,000,000 |
Required:
- Form reduced system cost pools for activities 7 and 8. Round any division to 9 decimal places in your computations. Round your final answers to the nearest dollar.
|
Inserting dies cost pool |
$ fill in the blank 1 |
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Purchasing cost pool |
$ fill in the blank 2 |
- Assign the costs of the reduced system cost pools to Wafer A and Wafer B. Round any division to 9 decimal places in your computations. Round your final answers to the nearest dollar.
|
Wafer A |
$ 1,500,000 fill in the blank 3 |
|
Wafer B |
$ 1,500,000 fill in the blank 4 |
- What if the two activities were 1 and 3? Repeat Requirements 1 and 2.
Form reduced system cost pools for activities 1 and 3.
Round any division to 9 decimal places in your computations. Round your final answers to the nearest dollar.
|
Developing test programs cost pool |
$ 857,143 fill in the blank 5 |
|
Testing products cost pool |
$ 2,142,857 fill in the blank 6 |
Assign the costs of the reduced system cost pools to Wafer A and Wafer B.
|
Wafer A |
$ 1,500,000 fill in the blank 7 |
|
Wafer B |
$ 1,500,000 fill in the blank 8 |
Feedback
- A key step in the reduction process is expressing each global consumption ratio as a weighted combination of the consumption ratios for each product.
- Use the cost pools solutions in Requirement 1.
3. Use 1 and 3 and repeat Requirements.
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