Willow Company produces lawn mowers. One of its plants produces two versions of

Question

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:

Additionally, the following overhead activity costs are reported:

* 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. (Round your answers to two decimal places.)

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

Explanation / Answer

Consumption ratio

Basic Deluxe Maintenance 25% 75% Engineering 25% 75% Materials handling 20% 80% Setting up 20% 80% Purchasing 33.33% 66.67% Receiving 33.33% 66.67% Paying suppliers 33.33% 66.67% Providing space 50% 50%

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