Consumption Ratios; Activity RatesSaludable Company produces two types of get-well cards: scented andregular. Drivers for the four activities are as follows: ScentedCards RegularCards Inspection hoursSetup hoursMachine hoursNumber of moves 1,0804209602.880 7201802,880720 The following activity data have been collected: Inspecting productsSetting up equipmentMachiningMoving materials $45,00028,50030,72016,200 Required:1. Calculate the consumption ratios for the four drivers (round totwo decimal places).2. CONCEPTUAL CONNECTION Is there evidence of productdiversity? Explain the significance of product diversity for decisionmaking if the company chooses to use machine hours to assign all overhead.3. Calculate the activity rates that would be used to assign costs toeach product (round to two decimal places).4. Suppose that the activity rate for inspecting products is $20 perinspection hour. How many hours of inspection are expected forthe coming year?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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 Setup hours Machine hours Number of moves |
1,080 420 960 2.880 |
720 180 2,880 720 |
The following activity data have been collected:
| Inspecting products Setting up equipment Machining Moving materials |
$45,000 28,500 30,720 16,200 |
Required:
1. Calculate the consumption ratios for the four drivers (round to
two decimal places).
2. CONCEPTUAL CONNECTION Is there evidence of product
diversity? Explain the significance of product diversity for decision
making if the company chooses to use machine hours to assign all overhead.
3. Calculate the activity rates that would be used to assign costs to
each product (round to two decimal places).
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?
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