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
  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
 
 
 
 $(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
  overhead
  cost
 was
 based
 on
 the
 direct
 labor,
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