Question

1. Selected activities and other information are provided for Patterson Company for its most recent year of operations.

   						Expected Consumption Ratios
   Activity		Driver		Quantity		Wafer A		Wafer B
   7.   Inserting dies		Number of dies		2,500,000		0.7		0.3
   8.  Purchasing materials		Number of purchase    orders		2,400		0.2		0.8
   1.  Developing test programs		Engineering hours		12,000		0.25		0.75
   3.  Testing products		Test hours		20,000		0.6		0.4
   ABC assignments						$150,000		$150,000
   Total overhead cost								$300,000

   Required:

   1. Form reduced system cost pools for activities 7 and 8. Do not round interim calculations. Round your final answers to the nearest dollar.

   Inserting dies cost pool	$
   Purchasing cost pool	$

   2. Assign the costs of the reduced system cost pools to Wafer A and Wafer B. Do not round interim calculations. Round your final answers to the nearest dollar.

   Wafer A	$
   Wafer B	$

   3. What if the two activities were 1 and 3? Repeat Requirements 1 and 2.

   Form reduced system cost pools for activities 1 and 3.

   Do not round interim calculations. Round your final answers to the nearest dollar.

   Developing test programs cost pool	$
   Testing products cost pool	$

   Assign the costs of the reduced system cost pools to Wafer A and Wafer B.

   Wafer A	$
   Wafer B	$

Answer 1

1. Form reduced system cost pools for activities 7 and 8.

Total overhead cost allocate in the ratio of 0.6:0.4

Inserting dies cost pool [$300,000 × 0.6]	$180,000
Purchasing cost pool [$300,000 × 0.4]	$120,000

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2. Assign the costs of the reduced system cost pools to Wafer A and Wafer B:

Compute Total cost assigned to wafer A:

Particulars
Inserting dies cost pool [$180,000 × 0.7]	$126,000
Purchasing cost pool [$120,000 × 0.2]	$24,000
Total	$150,000

Compute total cost assigned to wafer B:

Particulars
Inserting dies cost pool [$180,000 × 0.3]	$5,400
Purchasing cost pool [$120,000 × 0.8]	$96,000
Total	$101,400

______________________________________________________________________

3. What if the two activities were 1 and 3? Repeat Requirements 1 and 2.

Form reduced system cost pools for activities 1 and 3.

Developing test programs [$260,000 × 0.5/0.7]	$185,714.286
Testing products [$260,000 × 0.2/0.7]	$74,285.714

Compute total cost assigned to wafer A:

Developing test programs [$185,714.286 × 0.25]	$46,428.5716
Testing products [$74,285.714 × 0.6]	$44,571.4284
Total	$91,000

Compute total cost assigned to wafer B:

Developing test programs [$185,714.286 × 0.75]	$139,285.7144
Testing products [$74,285.714 × 0.4]	$29,714.2856
Total	$169,000