Exhibit 1

Blue Black Red Purple

Sales $ 75,000 $ 60,000 $ 13,950 $ 1,650
Material Costs $ 25,000 $ 20,000 $ 4,680 $ 550
Direct Labour $ 10,000 $ 8,000 $ 1,800 $ 200
Overhead @ 300% $ 30,000 $ 24,000 $ 5,400 $ 600
Total operating income $ 10,000 $ 8,000 $ 2,070 $ 300
Return on Sales 13.33% 13.33% 14.84% 18.18%

Exhibit 2
Blue Black Red Purple
Production Sales Volume 50,000 40,000 9,000 1,000
Unit selling price $ 1.5 $ 1.5 $ 1.6 $ 1.7
Materials unit cost $ 0.5 $ 0.5 $ 0.5 $ 0.6
Direct labour hrs/unit 0.02 0.02 0.02 0.02
Machine hours/unit 0.1 0.1 0.1 0.1
Production runs 50 50 38 12
Setup time/run 4 1 6 4
Total setup time (hours) 200 50 228 48
Parts administration 1 1 1 1

Expense Category Expense

Indirect Labour $ 20,000.0
Fringe Benefits $ 16,000.0
Computer Systems $ 10,000.0
Machinery $ 8,000.0
Maintenance $ 4,000.0
Energy $ 2,000.0
Total $ 60,000.0

Overhead per unit $ 0.60

(Using Traditional Method)
 Total Expense Category
$ 150,600 Indirect Laboor $ 20,000
$ 50,230 Scheduling & Handling Runs 50%
$ 20,000 Physical Changeover 40%
$ 60,000 Maintaining Records 10%
$ 20,370 Fringe Benefits (% of LC) 40%
13.53% Computer Systems $ 10,000
Production Run 80%
Keep Records 20%
Total Machinery
100,000 Maintenance
Energy

2,000
10,000 Allocation Base Runs
150 Indirect labor $ 66.67
Fringe Benefits $ 53.33
526 Computer Systems $ 53.33
4 Machinery
Maintenance
Energy
OH Allocated $ 173.33

Blue
Runs $ 8,666.67
Setup $ 5,475.29
Record $ 1,400
Machine Hours $ 7,000
Total Overhead $ 22,541.95

Overhead per Unit (By ABC Model) $ 0.45

Blue
Sales $ 75,000
Material Costs $ 25,000
Direct Labour $ 10,000
Overhead $ 22,542
Total operating income $ 17,458
Return on Sales 23.28%
Cost per unit $ 1.15
 Expense Allocation Base Budgeted Units Allocation Rate

$ 10,000 Runs 150 runs $ 66.67

$ 8,000 Setup 526 hrs $ 15.21
$ 2,000 Record 4 $ 500
$ 16,000

$ 8,000 Runs 150 runs $ 53.33

$ 2,000 Record 4 $ 500
$ 8,000 MH 10000 hrs/unit $ 0.80
$ 4,000 MH 10000 hrs/unit $ 0.40
$ 2,000 MH 10000 hrs/unit $ 0.20

Setup Record MH
$ 15.21 $ 500
$ 12.17 $ 400
$ 500
$ 0.80
$ 0.40
$ 0.20
$ 27.38 $ 1,400 $ 1.40

Black Red Purple Total Overhead

$ 8,666.67 $ 6,586.67 $ 2,080 $ 26,000
$ 1,368.82 $ 6,241.83 $ 1,314.07 $ 14,400
$ 1,400 $ 1,400 $ 1,400 $ 5,600
$ 5,600 $ 1,260 $ 140 $ 14,000
$ 17,035.49 $ 15,488.49 $ 4,934.07 $ 60,000

$ 0.43 $ 1.72 $ 4.93

Black Red Purple Total

$ 60,000 $ 13,950 $ 1,650 $ 150,600
$ 20,000 $ 4,680 $ 550 $ 50,230
$ 8,000 $ 1,800 $ 200 $ 20,000
$ 17,035 $ 15,488 $ 4,934 $ 60,000
$ 14,965 $ (8,018) $ (4,034) $ 20,370
24.94% -57.48% -244.49% 13.53%
$ 1.13 $ 2.44 $ 5.68