Magenta Company Has Identified Seven Activities as Part of Its

question 101

Essay

Magenta Company has identified seven activities as part of its manufacturing process and chosen corresponding activity drivers for each activity. The chart below lists the total cost of each activity, the proportion of activity driver used for each of Magenta's two products, and the activity cost assigned to each product. Fill in the blanks below:
Activity
Cost
Activity Driver
Proportion used by
Activity Cost: Prod. 1
Activity Cost: Prod. 2
Prod. 1
Prod. 2
Design
$60,000
Design time
40%
60%
a.
b.
Preparation
$18,000
Labor hours
50%
c.
$9,000
d.
Machining
$90,000
Machine hours
e.
f.
$27,000
g.
Finishing
h.
Batches
40%
i.
$10,000
j.
Inspection
k.
Units
l.
m.
$3,000
$6,000
Packaging
n.
Orders
o.
20%
$13,500
p.
Shipping
$17,000
Packages
70%
q.
r.
$5,100

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Definitions:

Stock Price

The current market price at which a share of stock can be bought or sold.

Underwriting Spread

The difference between the price at which underwriters purchase new securities from the issuer and the price at which these securities are sold to the public.

Residual Claim

A financial term referring to the right of shareholders to claim what remains of a company's assets after all debts have been paid in the event of liquidation.

Common Stockholders

Common stockholders are investors who own shares of a company's common stock, granting them the right to vote at shareholder meetings and receive dividends.