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Willow Company produces lawn mowers. One of its plants produces two versions of mowers: a basic model and a deluxe model. The deluxe model has a sturdier frame, a higher horsepower engine, a wider blade, and mulching capability. At the beginning of the year, the following data were prepared for this plant:

Basic Model

Deluxe Model

Expected quantity 40,000 20,000
Selling price $180 $360
Prime costs $80 $160
Machine hours 5,000 5,000
Direct labor hours 10,000 10,000
Engineering support (hours) 1,500 4,500
Receiving (orders processed) 250 500
Materials handling (number of moves) 1,200 4,800
Purchasing (number of requisitions) 100 200
Maintenance (hours used) 1,000 3,000
Paying suppliers (invoices processed) 250 500
Setting up equipment (number of setups) 16 64

Additionally, the following overhead activity costs are reported:

Maintaining equipment $114,000
Engineering support 120,000
Materials handling ?
Setting up equipment 96,000
Purchasing materials 60,000
Receiving goods* 40,000
Paying suppliers 30,000
Providing space 20,000
Total $ ?

* Receiving activity cost includes allocated share of forklift operators’ salaries.

Facility-level costs are allocated in proportion to machine hours (provides a measure of time the facility is used by each product). Receiving and materials handling use three inputs: two forklifts, gasoline to operate the forklift, and three operators. The three operators are paid a salary of $40,000 each. The operators spend 25% of their time on the receiving activity and 75% on moving goods (materials handling). Gasoline costs $3 per move. Depreciation amounts to $8,000 per forklift per year.

4. Calculate consumption ratios for each activity.
5. CONCEPTUAL CONNECTION:  Explain how the consumption ratios calculated in Requirement 4 can be used to reduce the number of rates. Calculate the rates that would apply under this approach.

4. Calculate consumption ratios for each activity. (Round your answers to two decimal places.)

Basic

Deluxe

Maintenance
Engineering
Materials handling
Setting up
Purchasing
Receiving
Paying suppliers
Providing space

b) Calculate the rates that would apply under this approach. (Round to two decimal places.)

Pool 1 $ Per Unit

Pool 2 $ Per Unit

Pool 3 $ Per Unit

Pool 4 $ Per Unit

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