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Consumption Ratios

Larsen, Inc., produces two types of electronic parts and has provided the following data:

Part X12 Part YK7 TotalUnits produced 100,000 600,000 Direct labor hours 40,000 60,000 100,000Machine hours 52,500 297,500 350,000Number of setups 48 72 120Testing hours 1,200 8,800 10,000Number of purchase orders 560 3,440 4,000

There are four activities: machining, setting up, testing, and purchasing.

Required:

1. Calculate the activity consumption ratios for each product. Round your answers to two decimal places.

Consumption Ratios Overhead ActivityPart X12Part YK7Activity DriverMachiningfill in the blank 1fill in the blank 2Machine hours, Number of setups, Purchase orders, or Testing hoursSetupsfill in the blank 4fill in the blank 5Machine hours, Number of setups, Purchase orders, or Testing hoursInspecting productsfill in the blank fill in the blank Machine hours, Number of setups, Purchase orders, or Testing hoursPurchasingfill in the blank fill in the blank Machine hours, Number of setups, Purchase orders, or Testing hours

2. Calculate the consumption ratios for the plantwide rate (direct labor hours). Round your answers to two decimal places.

Consumption RatiosOverhead ActivityPart X12Part YK7Plantwide: Manufacturingfill in the blank fill in the blank

Which product is undercosted?

Part X12 or Part YK7

3. If the machine hours were used for the plantwide rate, would this remove the cost distortion of a plantwide rate?

Yes or No

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