# Classic Pen

Topics: Expense, Pen, Operating expense Pages: 23 (673 words) Published: June 19, 2013
Classic
Pen
Company:
Developing
an
ABC
Model

1. Calculate
the
revised
product
costs
for
the
four
pens,
using
the
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

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

\$(3,302.05)

-­‐200%
Black
Red
Purple

\$130,230.00

\$20,370.00

14%

\$4,800.00

\$11,200.00

\$22,000.00

\$14,000.00

\$8,000.00

\$20,000.00

\$50,230.00

\$150,600.00

Total

2.

Why
are
the
results
using
ABC
so
different
from
the
original
results?

Explain.

• The
original
income
statement
was
based
on
the
premise
that
the
cost
was
based
on
the
direct
labor,