Classic Pen

Classic Pen Company: Developing an ABC Model

1. Calculate the revised product costs for the four pens, using the spreadsheet template provided and the information collected by Dempsey.

Blue

Sales Material costs Direct Labor (DL) 40% fringe on DL Machine time expense Production run expense Setup time expense Administer parts expense Total expense Operating income Return on sales $75,000.00

$25,000.00

$10,000.00

$4,000.00

$7,000.00

$7,333.33

$4,258.56

$1,200.00

$58,791.89

$16,208.11

22% $60,000.00

$20,000.00

$8,000.00

$3,200.00

$5,600.00

$7,333.33

$1,064.64

$1,200.00

$46,397.97

$13,602.03

23% $13,950.00

$4,680.00

$1,800.00

$720.00

$1,260.00

$5,573.33

$4,854.75

$1,200.00

$20,088.09

$(6,138.09) -­‐44% $1,650.00

$550.00

$200.00

$80.00

$140.00

$1,760.00

$1,022.05

$1,200.00

$4,952.05