Question

Alpha Technology produces two products: a high-end laptop under the label Excellent Laptops and an inexpensive desktop under the label Outstanding Computers. The two products use two overhead activities, with the following costs:

Setting up equipment $3,000
Machining $15,000
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. Excellent Laptops Outstanding Computers
Direct Labor $25,000 $10,000
Direct Materials $20,000 $5,000
Expected Production in Units 3,000 3,000
Machine Hours 850 2,000
Setup Hours 80 75
Calculate Outstanding Computer's consumption ratio for setup hours. (Note: Round your answer to two decimal places.)
a. 0.25
b. 0.48
c. 0.75
d. 0.45
e. 0.90

Answer 1

Alpha Technology

Outstanding Computer's consumption ratio for setup hours is:

b. 0.48

Step-by-step explanation:

a) Data and Calculations:

Overhead activities and costs:

Setting up equipment $3,000

Machining $15,000

Excellent Outstanding

Laptops Computers

Direct Labor $25,000 $10,000

Direct Materials $20,000 $5,000

Expected Production in Units 3,000 3,000

Machine Hours 850 2,000

Setup Hours 80 75

Total setup hours = 155 hours

Outstanding Computer's consumption ratio for setup hours = 75/155 * 100

= 48%