117521887 Sippican Corporation
Sippican Corporation
According to the activity based costing, the manufacturing overhead should be apportioned in the following method
The Direct Material cost per unit and the direct labour cost per unit for the valves, pumps and the flow controller is given below.
Direct Material Direct Labour
Total Units
Cost/unit
cost/unit
Valves
7500
16
12.35
Pumps
12500
20
16.25
Flow Controller
4000
22
13
The total manufacturing overhead of $654600 should be apportioned based on the activity required for manufacturing each of the valves, the pumps and the flow controller. The various manufacturing overheads required for the production is given below for each of the products.
Valves
Manufacturing Total Overhead Cost Driver
Overhead
Hours
Rate
Engineering
Production
Shipping
Set up
Machine
78000
15600
109200
117000
334800
900
345
340
3400
11200
Pumps
Flow Controller
No of hours Total Cost No. of hours Total Cost No.of hours Total Cost
86.66666667
45.2173913
321.1764706
34.41176471
29.89285714
60
20
40
100
3750
Total
5200
904.34783
12847.059
3441.1765
112098.21
134490.8 Total
240
100
100
600
6250
20800
600
52000
4521.73913
225 10173.91304
32117.64706
200 64235.29412
20647.05882
2700 92911.76471
186830.3571
1200 35871.42857
264916.8022 Total
255192.4004
Now, we know the overheads required for each of the products. Thus, we shall now find out the cost of each product based on the activity based costing. This can be found by including the direct material cost and the direct labour cost for each of the product.
Valves
Manufacturing
Overhead
Direct Material
Cost
Direct Labour
Cost
Total Cost
Total Cost/unit
Pumps
Flow Controller
134490.8
264916.8022
255192.4004
120000
250000
88000
92625
203125
52000
347115.8
718041.8022
395192.4004
46.282106
57.44334417
98.79810011
According to the traditional costing method and the ABC method, the cost of valves , pumps and flow controller is given below
Valves
Cost(Traditional
Method)
Cost(ABC Method)
Actual
According to the activity based costing, the manufacturing overhead should be apportioned in the following method
The Direct Material cost per unit and the direct labour cost per unit for the valves, pumps and the flow controller is given below.
Direct Material Direct Labour
Total Units
Cost/unit
cost/unit
Valves
7500
16
12.35
Pumps
12500
20
16.25
Flow Controller
4000
22
13
The total manufacturing overhead of $654600 should be apportioned based on the activity required for manufacturing each of the valves, the pumps and the flow controller. The various manufacturing overheads required for the production is given below for each of the products.
Valves
Manufacturing Total Overhead Cost Driver
Overhead
Hours
Rate
Engineering
Production
Shipping
Set up
Machine
78000
15600
109200
117000
334800
900
345
340
3400
11200
Pumps
Flow Controller
No of hours Total Cost No. of hours Total Cost No.of hours Total Cost
86.66666667
45.2173913
321.1764706
34.41176471
29.89285714
60
20
40
100
3750
Total
5200
904.34783
12847.059
3441.1765
112098.21
134490.8 Total
240
100
100
600
6250
20800
600
52000
4521.73913
225 10173.91304
32117.64706
200 64235.29412
20647.05882
2700 92911.76471
186830.3571
1200 35871.42857
264916.8022 Total
255192.4004
Now, we know the overheads required for each of the products. Thus, we shall now find out the cost of each product based on the activity based costing. This can be found by including the direct material cost and the direct labour cost for each of the product.
Valves
Manufacturing
Overhead
Direct Material
Cost
Direct Labour
Cost
Total Cost
Total Cost/unit
Pumps
Flow Controller
134490.8
264916.8022
255192.4004
120000
250000
88000
92625
203125
52000
347115.8
718041.8022
395192.4004
46.282106
57.44334417
98.79810011
According to the traditional costing method and the ABC method, the cost of valves , pumps and flow controller is given below
Valves
Cost(Traditional
Method)
Cost(ABC Method)
Actual