The document provides information on cost allocation and absorption costing for several companies. It includes:
- Calculating total cost per unit for a company using absorption and marginal costing, finding inventory value differs between the two methods.
- Analyzing production costs and profitability of different chocolate products using absorption costing, finding one product is unprofitable.
- Calculating overhead rates allocated to different cost pools and products for two companies, determining total overhead costs per unit for each product.
- Calculating overhead costs for two models using activity-based costing and drivers, finding one model is more expensive to produce.
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www.onlineassignment.net is a 24*7 online portal dedicated to fulfilling students' need from across the globe. Be it assignment, project or thesis, we can provide you quality solution within the deadline set by you. All levels and from any course of study, you need not worry anymore.
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Cost accounting: a project on cost analysis & budgetingRifat Hossain Khan
This is a project i worked with 3 other students. This project deals with the analysis of costs of manufacturing, pricing, budgeting. The product that we have chosen was Wooden Hanger.
In thsi slide EOQ calculation, safety inventory, reorder point, lead time, ELS calculation, Incremental Analysis, ABC system analysis along with theoretical description and explanation is given about how inventories is managed in the electronic industries.
CENTENNIAL BREWERY PRODUCED REVENUES OF $1,145,227 IN 2008. IT HAS EXPENSES (...JanuMorandy
CENTENNIAL BREWERY PRODUCED REVENUES OF $1,145,227 IN 2008. IT HAS EXPENSES (EXCLUDING DEPRECIATION) OF $812,640, DEPRECIATION OF $131,335, AND INTEREST EXPENSE OF $81,112. IT PAYS A MARGINAL TAX RATE OF 34 PERCENT
EGT267 Programming for Engineering Applications Spring 2020 .docxgidmanmary
EGT267 Programming for Engineering Applications Spring 2020
1
EGT 267 HW-1 (Due on February 20 in the class)
PROGRAMMIING ENGINEERING PROBLEMS
Problem 1: (Conversions) This problem involves converting a value in one unit to a value in
another unit. The program should prompt the user for a value in the specified units and then print
the converted value, along with the new units.
(1) Write a program to convert pounds to kilograms. (Recall that 1 kg = 2.205 lb). The pound
value you input/test is 159 lb.
Problem 2: (Areas and Volumes) This problem involves computing an area or a volume using
input from the user. The program should include a prompt to the user to enter the variables needed.
(1) Write a program to compute the area of a triangle with base b and height h. (Recall that
Aerea = ½* (b * h). ) The b and h values are 1.8 and 6.7 meters, respectively.
Problem 3: (Wind Tunnels) A wind tunnel is a test chamber built to generate different wind
speeds, or Mach numbers (which is the wind speed divided by the speed of sound). Accurate scale
models of aircraft can be mounted on force-measuring supports in the test chamber, and then
measurements of the forces on the model can be made at many different wind speeds and angles.
At the end of an extended wind tunnel test, many sets of data have been collected and can be used
to determine the coefficient of lift, drag, and other aerodynamic performance characteristics of the
new aircraft at its various operational speeds and positions. Data collected from a wind tunnel test
are listed in the following table:
EGT267 Programming for Engineering Applications Spring 2020
2
Assume that we would like to use linear interpolation to determine the coefficient of lift for
additional flight-path angles that are between -4 degrees and 21 degrees (Let’s estimate the
coefficient of lift @ 9 flight-path angle degrees). Write a program that allows the user to enter the
data for two points and a flight-path angle between those points. The program should then compute
the corresponding coefficient of lift.
Homework requirements:
please take two screenshots (one screen shot is for your code; the other is for the results), copy &
past them into your homework, and then submit a hard copy.
Sheet1MAC 7200, CASE STUDY WEEK 61) BREAK EVEN POINTA) IN UNITSSales Revenue16.00 Variable Materials3.00 Variable Labor1.00 Variable Overhead3.50 Variable Marketing Costs1.50Total Variable Costs:9.00CONTRIBUTION MARGIN PER UNIT7.0044%Fixed overhead4.00Fixed Marketing costs2.00Total Fixed Costs6.00BREAK EVEN POINT IN UNITS = FIXED COSTS / CONTRIBUTION MARGIN PER UNITEQUATION16N - 9N - 90,000 = 0Fixed Costs:90,000.007N = 90000CONTRIBUTION MARGIN PER UNIT7.00BREAK EVEN POINT IN UNITS12,857N=B) BREAK EVEN IN DOLLARSUNITS BREAKEVEN12,857SALES PRICES$ 16.00BREAK EVEN IN DOLLARS$ 205,712.00Combined2. SPECIAL ORDER ANALYSISremainder of ca ...
Cost accounting: a project on cost analysis & budgetingRifat Hossain Khan
This is a project i worked with 3 other students. This project deals with the analysis of costs of manufacturing, pricing, budgeting. The product that we have chosen was Wooden Hanger.
In thsi slide EOQ calculation, safety inventory, reorder point, lead time, ELS calculation, Incremental Analysis, ABC system analysis along with theoretical description and explanation is given about how inventories is managed in the electronic industries.
CENTENNIAL BREWERY PRODUCED REVENUES OF $1,145,227 IN 2008. IT HAS EXPENSES (...JanuMorandy
CENTENNIAL BREWERY PRODUCED REVENUES OF $1,145,227 IN 2008. IT HAS EXPENSES (EXCLUDING DEPRECIATION) OF $812,640, DEPRECIATION OF $131,335, AND INTEREST EXPENSE OF $81,112. IT PAYS A MARGINAL TAX RATE OF 34 PERCENT
EGT267 Programming for Engineering Applications Spring 2020 .docxgidmanmary
EGT267 Programming for Engineering Applications Spring 2020
1
EGT 267 HW-1 (Due on February 20 in the class)
PROGRAMMIING ENGINEERING PROBLEMS
Problem 1: (Conversions) This problem involves converting a value in one unit to a value in
another unit. The program should prompt the user for a value in the specified units and then print
the converted value, along with the new units.
(1) Write a program to convert pounds to kilograms. (Recall that 1 kg = 2.205 lb). The pound
value you input/test is 159 lb.
Problem 2: (Areas and Volumes) This problem involves computing an area or a volume using
input from the user. The program should include a prompt to the user to enter the variables needed.
(1) Write a program to compute the area of a triangle with base b and height h. (Recall that
Aerea = ½* (b * h). ) The b and h values are 1.8 and 6.7 meters, respectively.
Problem 3: (Wind Tunnels) A wind tunnel is a test chamber built to generate different wind
speeds, or Mach numbers (which is the wind speed divided by the speed of sound). Accurate scale
models of aircraft can be mounted on force-measuring supports in the test chamber, and then
measurements of the forces on the model can be made at many different wind speeds and angles.
At the end of an extended wind tunnel test, many sets of data have been collected and can be used
to determine the coefficient of lift, drag, and other aerodynamic performance characteristics of the
new aircraft at its various operational speeds and positions. Data collected from a wind tunnel test
are listed in the following table:
EGT267 Programming for Engineering Applications Spring 2020
2
Assume that we would like to use linear interpolation to determine the coefficient of lift for
additional flight-path angles that are between -4 degrees and 21 degrees (Let’s estimate the
coefficient of lift @ 9 flight-path angle degrees). Write a program that allows the user to enter the
data for two points and a flight-path angle between those points. The program should then compute
the corresponding coefficient of lift.
Homework requirements:
please take two screenshots (one screen shot is for your code; the other is for the results), copy &
past them into your homework, and then submit a hard copy.
Sheet1MAC 7200, CASE STUDY WEEK 61) BREAK EVEN POINTA) IN UNITSSales Revenue16.00 Variable Materials3.00 Variable Labor1.00 Variable Overhead3.50 Variable Marketing Costs1.50Total Variable Costs:9.00CONTRIBUTION MARGIN PER UNIT7.0044%Fixed overhead4.00Fixed Marketing costs2.00Total Fixed Costs6.00BREAK EVEN POINT IN UNITS = FIXED COSTS / CONTRIBUTION MARGIN PER UNITEQUATION16N - 9N - 90,000 = 0Fixed Costs:90,000.007N = 90000CONTRIBUTION MARGIN PER UNIT7.00BREAK EVEN POINT IN UNITS12,857N=B) BREAK EVEN IN DOLLARSUNITS BREAKEVEN12,857SALES PRICES$ 16.00BREAK EVEN IN DOLLARS$ 205,712.00Combined2. SPECIAL ORDER ANALYSISremainder of ca ...
CMA MAY 2022 EXAMINATION
INTERMEDIATE LEVEL II
Subject: CM231. MANAGEMENT ACCOUNTING
Model Solution CM231.-MAC-IL-II-Solution-CMA-May-2022-Examination.pdf
Recruiting in the Digital Age: A Social Media MasterclassLuanWise
In this masterclass, presented at the Global HR Summit on 5th June 2024, Luan Wise explored the essential features of social media platforms that support talent acquisition, including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok.
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Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
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Implicitly or explicitly all competing businesses employ a strategy to select a mix
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We know we want to create products which our customers find to be valuable. Whether we label it as customer-centric or product-led depends on how long we've been doing product management. There are three challenges we face when doing this. The obvious challenge is figuring out what our users need; the non-obvious challenges are in creating a shared understanding of those needs and in sensing if what we're doing is meeting those needs.
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Practice topic 9 - answers (1)
1. 1
Topic 2. Cost allocation
1. Manager received the following information about costs:
Direct materials – 4$ per kilogram
Direct labor – 22$ per hour
Variable indirect cost – 6$ per hour of direct labor
Total fixed indirect cost – 400000$.
Analysis of production indicated that manufacturing of one unit requires 3 kilograms
of materials and 2 hours of labor. Planned level of output and sales is 20000 units.
Tasks:
- Calculate total cost per unit using absorption costing
- Suppose company had manufactured 16000 units and sold only 14000 units,
calculate inventory value for the end of year (considering no inventory on the
beginning of the year).
- Calculate total cost per unit and inventory value for the end of period using
marginal costing.
Answer
Total cost per unit (Absorption costing)
DM = 4*3=12$ per unit
DL = 22*2=44$ per unit
Variable indirect costs = 6*2=12$ per unit
Fixed indirect cost per unit = 400000/20000=20 per unit
Total cost per unit = 12+44+12+20 = 88$ per unit
Value of inventory = 88*2000 = 176000$
Total cost per unit (Marginal costing)
DM = 4*3 = 12$ per unit
DL = 22*2 = 44$per unit
Variable indirect cost = 6*2 = 12$ per unit
Sum of fixed indirect costs is not included and move directly to income
statement.
Marginal cost per unit = 12+44+12 = 68$per unit
Value of inventory = 68*2000 =136000$
2. Chocolate factory produces three sorts of chocolate: Sky Bar, Moon Egg, Sun
Bar. Information about production presented on the table. Please, calculate total cost per
unit using absorption costingand profit per unit foreach sort of product. Analyze results.
Sky Bar Moon Egg Sun Bar
Direct labor cost per unit, $ 0,07 0,14 0,12
2. 2
Direct material cost per unit, $ 0,17 0,19 0,16
Output, units 500000 150000 250000
Direct man-hour per unit 0,001 0,01 0,005
Direct machine-hour per unit 0,01 0,04 0,02
Price per unit, $ 0,5 0,45 0,43
Annual overheads = 80000$
Answer
Calculation of overhead rate
𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 =
𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 𝑐𝑜𝑠𝑡
𝑏𝑎𝑠𝑒𝑠 𝑜𝑓 𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛
There are 3 possible bases of allocation:
1 – number of units – ineffective to use, because company manufacture 3 different
types of product. These different types of product require different resources and
number of units do not reflect this fact
2 – man-hour
3 – machine-hour
Man-hour and Machine-hour cay be a good base of allocation in this case. If
manufacturing requires more machine-hours in comparison with man-hours, it is
more effective to use machine-hour as a base of allocation.
𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 =
80000
0,01 ∗ 500000 + 0,04 ∗ 150000 + 0,02 ∗ 250000
= 5$ 𝑝𝑒𝑟 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 − ℎ𝑜𝑢𝑟
Allocation of indirect costs
Sky bar = 5*0,01 = 0,5$ per unit
Moon egg = 5*0,04 = 0,2$ per unit
Sun bar = 5*0,02 = 0,1$ per unit
Calculation of total cost
Sky bar = 0,07+0,17+0,05 = 0,29$ per unit
Moon egg = 0,14+0,19+0,2 = 0,53$ per unit
Sun bar = 0,12+0,16+0,1 = 0,38$ per unit
Profit per unit
Sky bar = 0,5-0,29 = 0,21$ per unit
Moon egg = 0,45-0,53 = -0,08$ per unit
Sun bar = 0,43-0,38 = 0,05$ per unit
3. 3
3. Company XZ makes two types of product X and Z. It estimates it will produce
423694 units of X and 652200 units of Z. Using the following information calculate
overhead for X and Z:
Driver X Z Cost Pool Estimated Overhead, $
Inspections 400 600 Material receipts 133000
Requisitions 450 950 Machine setups 300000
Parts 300 400 Assembly 700000
Setups 250 350 Inspection 250000
Calculation of overhead rate for particular cost pool
Material receipts
𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 =
133000
400 + 600
= 133$ 𝑝𝑒𝑟 𝑖𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛
Machine setups
𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 =
300000
450 + 950
= 200$ 𝑝𝑒𝑟 𝑟𝑒𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛
Assembly
𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 =
700000
300 + 400
= 1000$ 𝑝𝑒𝑟 𝑝𝑎𝑟𝑡𝑠
Inspection
𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 =
250000
250 + 350
= 416,67$ 𝑝𝑒𝑟 𝑖𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛
Overhead for X product
𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑟𝑒𝑐𝑒𝑖𝑝𝑡𝑠 =
133 ∗ 400
423694
= 0,126 ≈ 0,13 $ 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝑠𝑒𝑡𝑢𝑝𝑠 =
200 ∗ 4500
423694
= 0,212 ≈ 0,21 $ 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
𝐴𝑠𝑠𝑎𝑚𝑏𝑙𝑦 =
1000 ∗ 300
423694
= 0,708 ≈ 0,71 $ 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
𝐼𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛𝑠 =
416,67 ∗ 250
423694
= 0,246 ≈ 0,25 $ 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
Total overhead of X = 0,13+0,21+0,71+0,25 = 1,3$ per unit
Overhead for Z product
𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑟𝑒𝑐𝑒𝑖𝑝𝑡𝑠 =
133 ∗ 600
652200
= 0,122 ≈ 0,12 $ 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝑠𝑒𝑡𝑢𝑝𝑠 =
200 ∗ 950
652200
= 0,291 ≈ 0,29 $ 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
𝐴𝑠𝑠𝑎𝑚𝑏𝑙𝑦 =
1000 ∗ 400
652200
= 0,613 ≈ 0,61 $ 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
4. 4
𝐼𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛𝑠 =
416,67 ∗ 350
652200
= 0,224 ≈ 0,22 $ 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
Total overhead of Z = 0,12+0,29+0,61+0,22 = 1,24$ per unit
4. Company manufactures two types of products: M1 and M2. Manager uses ABC
and has the following information about indirect cost and cost drivers:
Type of cost Sum, $ Cost driver
Costs for equipment maintenance 97600 Number of maintenances
Cost for processing materials 42000 Number of production batch
Cost for processing special parts 50000 Number of special parts
Invoicing 31000 Number of orders
Other indirect costs 108000 Number of man-hours
Information about production presented on the table.
M1 M2
Annual volume of sales, units 8000 8000
Number of orders 60 250
Price per unit, $ 54 73
Direct material cost, $ 11 21
Direct labor cost, hours 2 2,5
Wages of workers per hour, $ 8 8
Specific parts per unit of output, units 2 8
Volume of production batch, units 2000 100
Equipment maintenance per production batch 1 3
Customer wants to place an order for one of the model and manager try to sale more
expensive model M2. Please:
- Calculate total cost of M1 and M2 models using ABC
- Analyze, what model manager should better try to sale.
Calculation of cost drivers
𝐿𝑎𝑏𝑜𝑟 𝑐𝑜𝑠𝑡 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑣𝑜𝑙𝑢𝑚𝑒 𝑜𝑓 𝑠𝑎𝑙𝑒 ∗ 𝐷𝐿 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡, $
M1 = 8000*2 = 16000$
M2 = 8000*2,5 = 20000$
𝑆𝑝𝑒𝑐𝑖𝑓𝑖𝑐 𝑝𝑎𝑟𝑡𝑠 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑣𝑜𝑙𝑢𝑚𝑒 𝑜𝑓 𝑠𝑎𝑙𝑒 ∗ 𝑠𝑝𝑒𝑐𝑖𝑓𝑖𝑐 𝑝𝑎𝑟𝑡𝑠 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
M1 = 8000*2 = 16000
M2 = 8000*8 = 64000
𝑁 𝑜𝑓 𝑏𝑎𝑡𝑐ℎ =
𝐴𝑛𝑛𝑢𝑎𝑙 𝑣𝑜𝑙𝑢𝑚𝑒 𝑜𝑑 𝑠𝑎𝑙𝑒
𝑉𝑜𝑙𝑢𝑚𝑒 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑏𝑎𝑡𝑐ℎ
M1 = 8000/2000 = 4
5. 5
M2 = 8000/100 = 80
𝑁 𝑜𝑓 𝑒𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡 𝑚𝑎𝑖𝑡𝑒𝑛𝑎𝑛𝑐𝑒 = 𝑁 𝑜𝑓 𝑏𝑎𝑡𝑐ℎ ∗ 𝐸𝑞𝑢𝑖𝑝𝑒𝑚𝑒𝑛𝑡 𝑚𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 𝑝𝑒𝑟 𝑏𝑎𝑡𝑐ℎ
M1 = 4*1 = 4
M2 = 80*3 = 240
Overhead rate for cost pool:
𝐸𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡 𝑚𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 =
97600
4 + 240
= 400$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑒𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡 𝑚𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒
𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 =
42000
4 + 80
= 500$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑏𝑎𝑡𝑐ℎ
𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑠𝑝𝑒𝑐𝑖𝑎𝑙 𝑝𝑎𝑟𝑡𝑠 =
50000
16000 + 64000
= 0,625$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑠𝑝𝑒𝑐𝑖𝑓𝑖𝑐 𝑝𝑎𝑟𝑡
𝐼𝑛𝑣𝑜𝑖𝑐𝑖𝑛𝑔 =
31000
60 + 250
= 100$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑜𝑟𝑑𝑒𝑟
𝑂𝑣𝑒𝑟 𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 𝑐𝑜𝑠𝑡 =
108000
16000 + 20000
= 3$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑚𝑎𝑛 − ℎ𝑜𝑢𝑟
Allocation of overhead for M1 and M2
M1 M2
Cost foe equipment maintenance 400*4=1600$ 400*240=96000$
Cost for processing materials 500*4=2000$ 500*80=40000$
Cost for processing special parts 0,625*16000=10000$ 0,625*64000=40000$
Cost for invoicing 100*60=6000$ 100*250=25000$
Over indirect cost 3*16000=48000$ 3*20000=60000$
Total cost of M1 and M2
M1=11*8000+8*16000+67600 = 283600$
M2=21*8000+8*20000+261000 = 589000$
To analyse what model manager should try to sale let calculate gross profit
Gross profit = Revenue – Cost
Revenue M1 = 8000*54 = 432000$
Revenue M2 = 8000*73 = 584000$
Gross profit M1 = 432000 – 283600 = 148400$
Gross profit M2 = 584000 – 589000 = -5000$
5. Company manufactures three types of boats for retail market. Company uses
traditional costing system (Absorption costing). Manager had the following budgeting
information presented on the table. Calculate gross profit of the company. Calculate
gross profit of manufacturing each model of boats.
6. 6
Model of boat Superior Deluxe Ultra
Revenue, $ 54000 86400 242000
Direct material cost, $ 17600 27400 40200
Direct labor cost, $ 10700 13400 16600
Output, units 1000 1200 800
Machine-hour per one boat 100 200 300
Manufactured overheads, $ 69600. Overheads allocated on the base of machine-
hours.
Suppose company considers changing traditional costing to ABC. Manager had
determined following activities and linked cost drivers.
Activity Cost driver Overhead, $
Machine work Machine-hours 13920
Maintenance of equipment Number of installations 23920
Quality inspection Number of inspections 14140
Inventory purchasing Number of requests for purchasing 6840
Delivery of inventory from
warehouse
Number of requests for delivery 10780
Manager also received the following information:
Model of boat Superior Deluxe Ultra
Output, units 1000 1200 800
Number of units, manufactured during one
production cycle of equipment
5 4 2
Number of quality inspections during one
production cycle of equipment
10 20 30
Number of requests for purchasing of materials 500 600 800
Number of requests for delivering ofmaterials from
warehouse
4000 5000 7000
Equipment should be maintained for each model of boat in the beginning of each
cycle.
- Calculate total cost per unit for each model using ABC
- Why ABC may be more effective and gives more accurate results comparing
traditional costing?
Calculation of allocation rate
𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 𝑤𝑜𝑟𝑘 =
13920
100 ∗ 1000 + 200 ∗ 1200 + 300 ∗ 800
= 0,024$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑚𝑎𝑐ℎ𝑢𝑛𝑒 ℎ𝑜𝑢𝑟
7. 7
𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑚𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 𝑒𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡 =
23920
200 + 300 + 400
= 26,58$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑖𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛
𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛 =
14140
10 ∗ 200 + 20 ∗ 300 + 30 ∗ 400
= 0,707$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑖𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛
𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑖𝑛𝑔 =
6840
500 + 600 + 800
= 3,6$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑟𝑒𝑞𝑢𝑒𝑠𝑡 𝑓𝑜𝑟 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑖𝑛𝑔
𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑜𝑓 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 =
10780
4000 + 5000 + 7000
= 0,67375$ 𝑝𝑒𝑟 𝑜𝑛𝑒 𝑟𝑒𝑞𝑢𝑒𝑠𝑡 𝑜𝑓 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦
Allocation of indirect cost
Superior Deluxe Ultra
Machine work 0,024*100*1000 =
2400$
0,024*200*1200 =
5760$
0,024*300*800
=5760$
Maintenance
equipment
26,58*200 =
5316$
26,58*300 =
7974$
26,58*400 =
10632$
Quality
inspections
0,707*10*200 =
1414$
0,707*20*300 =
4242$
0,707*30*400 =
8484$
Inventory
purchasing
3,6*500 = 1800$ 3,6*600 = 2160$ 3,6*800 = 2880$
Delivery of
inventory
0,67375*4000 =
2695$
0,67375*5000 =
3368,75$
0,67375*7000 =
32472,25$
Total overhead per product, overhead per unit, total cost of product
Superior Deluxe Ultra
Total overhead 13625$ 23504,75$ 32472,25$
Overhead per unit 13,625$ 19,58$ 40,59$
Total cost 41925$ 64304,75$ 89272,25$
Using traditional costing
𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 =
69600
100 ∗ 1000 + 200 ∗ 1200 + 300 ∗ 800
= 0,12$ 𝑝𝑒𝑟 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 ℎ𝑜𝑢𝑟
Allocation of indirect cost
Superior = 100*0,12 = 12$ per unit
8. 8
Deluxe = 200*0,12 = 24$ per unit
Ultra = 300*0,12 = 36$ per unit
Total cost
Superior = 17600+10700+12*1000 = 40300$
Deluxe = 27400+13400+24*1200 = 69600$
Ultra = 40200+16600+36*800 = 85600$