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Unit Cost Under ABC Costing Method
Instructions on how to create a unit cost for two product lines using the ABC...
From Mary
1. First Stage of Allocation of cost to the activity cost pools:
Particular Activity Cost PoolsAssembling Processing Supporting Other TotalUnits Cost CustomersManufacturing overhead 250,000 175,000 25,000 50,000 500,000Selling and AdministrativeOverhead 30,000 135,000 75,000 60,000 300,000
TOTAL COST 280,000 310,000 100,000 110,000 800,0002. Activity Rates for the Activity Cost Pools:
Activity Cost PoolsAssembling Processing SupportingUnits Cost CustomersTotal cost incurred in Activity Pool 280,000 310,000 100,000Measurement of Activity Nos. of units Nos. of orders Nos. of customersTotal activity in activity cost pool 1,000 units 250 orders 100 customers
ACTIVITY RATE 280 1,240 1,0003. Total cost incured on Office Mart's Order:
Activity Cost Pool Activity Rate Nos. of activity ABC CostA
ssembling Unit 280 per unit 80 cabnits 22,400Processing Cost 1,240 per order 4 orders 4,960Supporting custmer 1,000 per customer 01 Custmer 1,00028,360
Product Margin on 80 filling cabnits:
Sales (80 units x Rs. 595) 47,600
Cost incurred:
a) Direct Material (80 units x Rs. 180) 14,400b) Direct Labor (80 units x Rs. 50) 4,000c) Volume related overhead 22,400d) Order related overhead 4,960 (45,760)
PRODUCT MARGIN 1,840Customer Margin:
Product Margin 1,840Less: Customer support overhead (1,000)
CUSTOMER MARGIN 840
Req no.1: Activity rate for the activity cost pools are:
Particular Activity Cost PoolsAssembling Processing Supporting Other TotalUnits Cost CustomersManufacturing overhead 250,000 175,000 25,000 50,000 500,000Selling and AdministrativeOverhead 30,000 135,000 75,000 60,000 300,000
TOTAL COST 280,000 310,000 100,000 110,000 800,000
Activity rate:
Assembling Processing SupportingUnits Cost CustomersTotal Activity 1,000 units 250 orders 100 customers
Allocated rate
Manufacturing overhead 250 700 250Selling and AdministrativeOverhead 30 540 750
TOTAL RATE
280 1,240 1,000
Required no.2:Overhead cost for the four orders of total of 80 filling cabinets of Office Mart:
P
RODUCT MARGIN Customer MarginAssembling Processing SupportingUnits Cost CustomersTotal Activity during Office mart order 80 units 4 orders 1 customer Manufacturing overhead cost 20,000 2,800 250Selling and Admin. Overhead cost 2,400 2,160 750
22,400 4,960 1,000
Required no. 3: ACTION ANALYSIS:PRODUCT MARGIN
Sales (80 cabinets x Rs. 595) 47,600
L
ess: Green color cost
Direct Material (80 cabinets x Rs. 180) 14,400 (14,400)
GREEN MARGIN 33,200
Less: Yellow color cost:
Direct labor (80 cabinets xRs. 50) 4,000Manufacturing overheadAssembling dept cost 20,000Processing cost 2,800 22,800 (26,800)
YELLOW MARGIN 6,400
Less: Red color cost:
Selling and administrative overheadAssembling dept cost 2,400Processing cost 2,160 (4,560)
RED MARGIN 1,840CUSTOMER MARGIN
Sales (80 cabinets x Rs. 595) 47,600
Less: Green color cost
Direct Material (80 cabinets x Rs. 180) 14,400 (14,400)
GREEN MARGIN 33,200
Less: Yellow color cost:
Direct labor (80 cabinets xRs. 50) 4,000Manufacturing overheadAssembling dept cost 20,000Processing cost 2,800Supporting customer 250 23,050 (27,050)
YELLOW MARGIN 6,150
Less: Red color cost:
Selling and administrative overheadAssembling dept cost 2,400Processing cost 2,160Supporting customer 750 (5,310)
RED MARGIN 840
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ABC Costing (10 Edition)-2008
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| Upload Date: | 11/25/2009 |
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