ABC calculation for Galvanized pallet nails

Units of driver consumed

Cost Pool
1995-96

Cleaning House 2600

Depreciation-Wire Drawing Machine 2600
Depreciation - Nail Galvanizer 2600
Depreciation- Heading and Threading 2600
Material Handling 20
Dies Retooling 15
Wire Drawing Changeovers 2
Quality Inspection 4
Pricing and Advertising
Order Processing 10
Invoicing 10
Information systems 2600
Freight @ 18% 2600
Labor
EVA on Wire Drawing Equipment 2600
EVA on Nail Galvanizer 2600
EVA on Heading/Threading Machine 2600
Inventory EVA 2600
Conversion cost

Workings

less
Total Cost

less
Profit/Loss
Galvanized pallet nails 1995-96

Driver Volume Spending

Activity rate Conversion cost
1995-96 1995-96

100,000 $210,000 $0.026 5460

100,000 $420,000 $0.026 10920
40,000 $623,000 $0.065 40495
2,600 $50,000 $1.000 50000
4,000 $305,000 $0.005 1525
3,000 $352,000 $0.005 1760
700 $267,000 $0.003 763
1,000 $407,000 $0.004 1628
$300,000 10000
3,000 $163,000 $0.003 543
3,000 $87,000 $0.003 290
100,000 $1,287,000 $0.026 33462
$1,110,000 30000
400000
100,000 $1,800,000 $0.026 46800
40,000 $1,800,000 $0.065 117000
2,600 $90,000 $1.000 90000
100,000 $692,000 $0.026 17992
st 858638

Workings
Material Cost 900000
Conversion Cost 858638
al Cost 1758638

Sales 1950000
Total Cost 1758638
it/Loss 191362
 ABC calculation for Galvanized

Units of driver consumed

Cost Pool
1996-97

Cleaning House 2817

Depreciation-Wire Drawing Machine 2817
Depreciation - Nail Galvanizer 2817
Depreciation- Heading and Threading 2817
Material Handling 21
Dies Retooling 13
Wire Drawing Changeovers 2
Quality Inspection 4
Pricing and Advertising
Order Processing 9
Invoicing 9
Information systems 2817
Freight @ 18%
Labor
EVA on Wire Drawing Equipment 2817
EVA on Nail Galvanizer 2817
EVA on Heading/Threading Machine 2817
Inventory EVA 2817
Conversion cost

Work

less
Total Cost

less
Profit/Loss
C calculation for Galvanized pallet nails 1996-97

Driver Volume Spending

Activity rate
1996-97 1995-96

110,000 $222,000 $0.026

110,000 $420,000 $0.026
45,000 $623,000 $0.063
2,817 $140,000 $1.000
4,500 $350,000 $0.005
3,300 $382,000 $0.004
700 $272,000 $0.003
1,000 $420,000 $0.004

3,000 $143,000 $0.003

3,000 $92,000 $0.003
110000 $1,330,000 $0.026

110000 $1,724,000 $0.026

45,000 $1,688,000 $0.063
2,817 $227,000 $1.000
110,000 $703,000 $0.026
Conversion cost

Workings
Material Cost 1100000
Conversion Cost 1270623
Total Cost 2370623

Sales 2100000
Total Cost 2370623
Profit/Loss -270623
Conversion cost

5685
10756
39000
140000
1633
1505
777
1680
9000
429
276
34060
31000
600000
44150
105669
227000
18003
1270623
 Macro Level Comparison of ABC Calculations
Particulars 1995-96 1996-97 Absolute change Percentage change
Material Cost 900000 1100000 200000 22%
less Conversion Cost 858638 1270623 411985 48%
Total Cost 1758638 2370623 611985 35%

Sales 1950000 2100000 150000 8%

less Total Cost 1758638 2370623 611985 35%
Profit/Loss 191362 -270623 -461985 -241%
 Micro Level Comparison of ABC Calcualtions

Conversion cost
Cost Pool
1995-96 1996-97
Cleaning House 5460 5685
Depreciation-Wire Drawing Machine 10920 10756
Depreciation - Nail Galvanizer 40495 39000
Depreciation- Heading and Threading 50000 140000
Material Handling 1525 1633
Dies Retooling 1760 1505
Wire Drawing Changeovers 763 777
Quality Inspection 1628 1680
Pricing and Advertising 10000 9000
Order Processing 543 429
Invoicing 290 276
Information systems 33462 34060
Freight @ 18% 30000 31000
Labor 400000 600000
EVA on Wire Drawing Equipment 46800 44150
EVA on Nail Galvanizer 117000 105669
EVA on Heading/Threading Machine 90000 227000
Inventory EVA 17992 18003
Conversion Cost 858638 1270623
ABC Calcualtions

Changes

Absolute terms Percentage terms

225 4%
-164 -2%
-1495 -4%
Depreciation for new machinary ($900000/10 years
90000 180%
= $90000 per year.
108 7%
-255 -14%
14 2%
52 3%
-1000 -10%
-114 -21%
-14 -5%
598 2%
1000 3%
200000 50% Cost of labour is for new machinary installation.
-2650 -6%
-11331 -10%
137000 152% New Machinary
11 0%
411985 48%
 Particulars 1995-96 1996-97 Forcasting 1997-98
Sales ($M) 1.95 2.1 3.2
Sales (tons) 2600 2817 4226
Material Cost ($M) 0.9 1.1 1.7
Conversion Cost ($M) 0.859 1.271 1.3
Net Profits ($M) 0.191 -0.271 0.2
 ABC calculation for Galvanized palle

Units of driver consumed

Cost Pool
1996-97

Cleaning House 2817

Depreciation-Wire Drawing Machine 2817
Depreciation - Nail Galvanizer 2817
Depreciation- Heading and Threading 2817
Material Handling 21
Dies Retooling 13
Wire Drawing Changeovers 2
Quality Inspection 4
Pricing and Advertising
Order Processing 9
Invoicing 9
Information systems 2817
Freight @ 18%
Labor
EVA on Wire Drawing Equipment 2817
EVA on Nail Galvanizer 2817
EVA on Heading/Threading Machine 2817
Inventory EVA 2817
Conversion cost

Workings

Add
Total Cost

less
Profit/Loss

Less
ABC calculation for Galvanized pallet nails 1996-97

Driver Volume Spending

Activity rate
1996-97 1995-96

110,000 $222,000 $0.026

110,000 $420,000 $0.026
45,000 $623,000 $0.063
2,817 $140,000 $1.000
4,500 $350,000 $0.005
3,300 $382,000 $0.004
700 $272,000 $0.003
1,000 $420,000 $0.004

3,000 $143,000 $0.003

3,000 $92,000 $0.003
110000 $1,330,000 $0.026

110000 $1,724,000 $0.026

45,000 $1,688,000 $0.063
2,817 $227,000 $1.000
110,000 $703,000 $0.026
Conversion cost

Workings Corrected value

Material Cost 1100000 1100000
Conversion Cost 1270623 834823
Total Cost 2370623 1934823

Sales 2100000 2100000

Total Cost 2370623 1934823
Profit/Loss -270623 165177

Conversion Cost 1996-97 1270623

Reconciliation of cost of inaccessable capacity
Depreciation 90000 =900000/10
EVA of equipment 145800 =(900000-90000)*18%
Labour 200000
Corrected Conversion Cost 1996-97 834823
Unaccessable capacity 435800

0.83
Conversion cost

5685
10756
39000
140000
1633
1505
777
1680
9000
429
276
34060
31000
600000
44150
105669
227000
18003
1270623