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Plastics Company makes just two product$$ lines, plastic casings for pens and plastic casings for cell phones.

Based on new$$ information, management has adjusted the percentages that apply to the first stage of the ABC system as shown below.

Indirect Resource

Percent of Resource Used in Plant and Machinery Engineers and CAD Equipment

Processing activity $90\%30\%$

Production support activity $10\%70\%$

The process map depicts a$$ two$-$stage ABC$$ system, which uses two stages of allocation to get from the original indirect resource cost to the final product or service cost.$($At this$$ point,

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Plastics uses the ABC system only for production$$ costs, so the

$ $130$ comma $000$$$130,000$

of$$ non$-$production value$-$chain costs remains$$ unallocated.$)$ The first stage allocates indirect resource costs to$$ activity$-$cost pools, in this case two$$ activities, processing activity and production support activity. The second stage allocates activity costs to the products or services. In$$ essence, the cost objects in the first stage are the$$ activities, and the cost objects in the second stage are the products.

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Plastics has only two indirect$$ resources, $(1)$ plant and machinery and$(2)$ engineers and CAD$$ equipment, and only two$$ activities, $(1)$ processing and$(2)$ production support.

The cost of engineers and CAD equipment depends mainly on the amount of time engineers spend on a product. Engineers$$ spend, on$$ average, about $48$ minutes each hour performing$$ production$-$support activities, such as designing casings. They spend the other $12$ minutes supervising the processing activity.$$ Thus, we allocate$(48/60)=80\%$ and$(12/60)=20\%$ of the cost of engineers and CAD equipment to the$$ production$-$support and processing$$ activities, respectively. The cost of plant and machinery depends mostly on the square feet of space used. Processing uses$75\%$ of the space and production support uses$25\%,$ so processing gets$75\%$ of the plant and machinery cost and production support gets$25\%.$

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