Calculate the consumption ratios for the four drivers. Round your answers to two decimal places

Question

Consumption Ratios; Activity Rates

Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows:

	Scented Cards	Regular Cards
Inspection hours	130		90
Setup hours	90		30
Machine hours	160		570
Number of moves	215		80

The following activity data has been collected:

Inspecting products	$4,980
Setting up equipment	4,850
Machining	6,330
Moving materials	1,250

Required:

1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places.

	Scented Cards	Regular Cards
Inspection hours
Setup hours
Machine hours
Number of moves

2. Which of the following statements indicate there is product diversity?

Significant variation in the consumption ratios from driver to driver.

Explain the significance of product diversity for decision making if the company chooses to use machine hours to assign all overhead.

If machine hours are used as the only driver, scented cards would receive 22% of the overhead, and regular cards would receive 78% of the overhead. Yet, the scented cards consume well over 59% of the non-machine related overhead. Thus, the Scented cards are undercosted , and the Regular cards are overcosted . This inaccuracy can adversely affect many decisions, including pricing, keep or drop, and cost-volume-profit.

3. Calculate the activity rates that would be used to assign costs to each product. Round your answers to the nearest cent.

Rates:
Inspecting products	per inspection hour
Setting up equipment	per setup hour
Machining	per machine hour
Moving materials	per move

4. Suppose that the activity rate for inspecting products is $20 per inspection hour. How many hours of inspection are expected for the coming year? If required, round your answer to nearest whole number of hours.
fill in the blank 19 inspection hours