Classic Pen Case Analysis

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  • Topic: Costs, ABC model of flower development, Cost
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  • Published : October 5, 2012
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CLASSIC PEN COMPANY: DEVELOPING AN ABC MODEL
REVISED PRODUCT COSTS FOR THE FOUR PENS, BASED ON THE ACTIVITY INFORMATION COLLECTED BY DEMPSEY

Cost centres under ABC
Indirect labour=$ 20,000
40% *20,000=8,000
Total indirect labour=$ 28,000
Computer expenses=$ 10,000
Machine expenses= $ 8,000+ $ 4,000+ $ 2,000=$ 14,000
Cost estimates/allocation under ABC
ActivityIndirect labour
Computer expenses
Machine expensesTotalActivity rate
Handle production runs50%14,00080%8,00022,000150146.7 Set up time40%11,20011,20052621.29
Parts administration10%2,80020%2,0004,80041200
Machine support100%14,00014,00010001.4
Total28,00010,00014,00052,000

Resource costs to activities (ABC cost sheet
BlueBlackRedPurple
Total
50,00040,0009,0001,000100,000
Direct material25,00020,0004,68055050,230
Direct labour10,0008,0001,80020020,000
40% of fringe benefits4,0003,200720808,000
Overheads
Machine support7,0005,6001,2601401,4000
Production run expenses7,3337,3335,5731,76022,000
Set up expenses4,2591,0654,8551,02211,200
Administrative expenses1,2001,2001,2001,2004,800
Total overheads19,79215,19812,8884,12252,000
Total cost58,79246,39820,0884,952130,230
Cost per unit1.181.162.234.95
Sales75,00060,00013,9501,650150,600
1.51.51.551.65
profit16,20813,602-6,138-3,30220,370
Profit per unit0.320.34-0.68-3.30
Profit margin22%23%-44%-200%14%

Workings Blue
Set up expenses=200/526*11200=4,258.5
Production run expenses=50/150*28,000=
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