Color scope Case Management Accounting

Company overview
 Colorscope is a small vibrant firm in the graphic arts industry, trying to find a way to compete in a growing competitive environment in the pre-press printing sector, which is due to the new technologies coming to the market, that made a change the competitive position of the company.

The impact of the external environment
 Problem Identified:
 Lowering of the barriers to entry due to the cheaper technologies implemented in the market
 Advanced technology grinding down the quality-based competitive advantage.
 High competition from large national chains and small stand-alones
 Price pressures and loss of high margins, i.e. rent

Management Accounting

The Original Allocation:
The company faced inaccuracy issues in identifying customer profitability, using of the Activity Based Costing (ABC)

Calculating “rent” of Assembly Sq. ft.: We took the total amount of rent and divided it by the total amount of the square feet which is 30000/15000 and then multiplied it by the square feet of the assembly department “cost pool” 4000, which adds up to $8000.
($30,000/15,000 sq. ft.)*4,000= $8,000
 Calculating “Others” for Assembly Labour hrs.: Using the same method, but using the total amount of the number of labour hours instead of the square feet utilized. ($20,000/2440hrs)*1,280= $10,491.8
In order to maintain a competitive advantage, this report is to review the system they are using and point out what needs to be done to resolve the issues faced

Wages
Depreciation
Rent (CAB=SqFt)
Others
Total Overhead
Overhead per Labor Hour

Job Preparation
Scanning
$
8,000.00 $
$
500.00 $
$
2,000.00 $
$
1,311.48 $
$
11,811.48 $
$
73.82 $

Job Preparation
Floor space in Sq Ft
Labor Hours

32,000.00
25,000.00
2,000.00
5,245.90
64,245.90
100.38

Scanning
1000
160

Assembly
$
$
$
$
$
$

Assembly
1000
640

64,000.00
10,000.00
8,000.00
10,491.80
92,491.80
72.26

Output
4000
1280