Consumption Ratios

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

Part X12 Part YK7 Total

Units 100,000 600,000 —
produced
Direct 30,000 70,000 100,000
labor
hours
Machine 50,000 300,000 350,000
hours
Number 40 80 120
of setups
Testing 1,000 9,000 10,000
hours
Number 500 3,500 4,000
of
purchase
orders
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.

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

Which product is undercosted?

3. Would this remove the cost distortion of a plantwide rate?