DEPT 1 400000 X1500 160 X1500 240000

2500

DEPT 2 100000 X300 250 X300 75000

400

DEPT 3 500000 X300 1000 X300 300000

500
TOTAL 615000
 PRODUCTS
COST M S T TOTAL
POWER 40000 80000 60000 180000
QUALITY INSPECTION 105000 75000 90000 270000

145000 155000 150000 450000

WORKING NOTE

1 COST DRIVER RATE OF POWER TOTAL O/H

TOTAL KILOWATT HRS

200000
50000

2 COST DRIVER RATE OF QUALITY TOTAL O/H

TOTAL NO OF INSPECTIONS

300000
10000

30
PARTICULARS AMOUNT
DIRECT MATERIAL 30000
DIRECT LABOUR (3000X5) 15000
GENERAL O/H (500X3) 1500
SETUPS (4000X2) 8000
SECURITY CHARGES 5000

TOTAL COST OF GAME 59500

 PARTIULARS AMOUNT
1 SETUPS 16200
2 PURCHASE ORDER 1050
3 PRODUCT TESTING 3400
4 TEMPLATE ETCHING 1280
5 FACILITIES 20000

TOTAL O/H 41930

WORKING NOTE

COST DRIVER RATE = ESTIMATED O/H

EXPECTED ACTIVITY
1 SETUP 18000 360
50
2 PURCHASE ORDER 1050 2
525
3 PRODUCT TESTING 3500 10
350
4 TEMPLATE ETCHING 1120 40
28
5 FACILITIES 20000 2.5
8000
 1 CALCULATION OF COST DRIVER RATE
TOTAL O/H
TOAL NO OF ACTIVITIES

MATERIAL PROCUREMENT 1160000 527.27

2200
MATERIAL HANDLING COST 500000 367.65
1360
MAINTENANCE 1940000 115.48
16800
SET-UP 830000 798.08
1040
QUALITY CONTROL 352000 195.56
1800
MACHINERY 1440000 30
48000

2 CALCULATION OF COST OF BATCH OF COMPONENT

PARTICULARS AMOUNT
MATERIAL COST 260000
LABOUR COST 490000
MATERIAL OREDERS 27418.18
MATERIAL MOVEMENTS 13235.29
SET-UPS 39903.85
MAINTENANCE HOURS 159357.1
QUALITY CONTROL INSPECTION 10951.11
MACHINE HOURS 108000

TOTAL O/H 1108866

2, 4, 5, 7, 11, 12, 13,15, 16, 17, 19, 20, 23, 28, 29, 30, 31, 33, 34, 37, 41, 43
1 CALCULATIONS OF ACTIVITY RATES

ACTIVITY COST DRIVER CAPACITY

ATM SERVICES 100000 NO OF TRANSACTIONS 200000
COMPUTER PROCESSING 1000000 NO OF TRANSACTIONS 2500000
STATEMENTS 800000 NO OF STATEMENTS 500000
CUSTOMER INQUIRY 360000 TELEPHONES MIN 600000

2 CALCULATIONS OF COST OF EACH PRODUCTS

ACTIVITY SAVINGS A/C PERSONAL LOANS CREDIT CARDS

ATM SERVICES 90000 - 10000
COMPUTER PROCESSING 800000 80000 120000
STATEMENTS 480000 80000 240000
CUSTOMER INQUIRY 210000 54000 96000

TOTAL COST 1580000 214000 466000

TOTAL UNITS 30000 5000 10000
CPU 52.67 42.8 46.6
RATE
0.5
0.4
1.6
0.6
A) TRADITIONAL COSTING
1
TOTAL PRODUCTION O/H 2600000
TOTAL UNITS PRODUCED 60000
CPU 43.33 2

PRODUCTS UNITS CPU TOTAL COST

A 10000 43.33 433300
B 20000 43.33 866600
C 30000 43.33 1299900

2599800

B) ABC ANALYSIS

ACTIVITY COST DRIVER RATE TOTAL A B

STORES RECEIVING PURCHASE REQ 236.8 296000 71040 106560
INSPECTION NO OF PROD RUN 298 894000 223500 312900
DESPACTH ORDERS EXECUTED 210000 50400 75600
MACHINE SETUPS NO OF SETUPS 1200000 360000 390000

AS PER ABC 2600000 704940 885060

C) COMPARISION
A B
O/H AS PER ABC 704940 885060
OH/ AS PER TRADITIONAL 433300 866600

(OVER) / UNDER ABSORPTION 271640 18460

WORKING
STORES REC 296000 236.8
1250

INSPECTION 894000 298

3000

C
118400
357600
84000
450000

1010000

C
1010000
1299900

-289900
 A) O/H ALLOCATED TO DEP B AS PER TRADITIONAL METHOD

TOTAL O/H 76500

TOTAL HOURS 4500

17 PER HR

DEP B 900 HRS 15300

B) O/H ALLOCATED TO DEP B AS PER ABC

PARTICULARS DRIVER RATES NO OF ACTIVITIES TOTAL COST

SETUPS 66 24 1584
QUALITY CONTROL 60 60 3600
FABRICATION 10 900 9000

14184
1) DIRECT LABOUR HOUR RATE

TOTAL O/H 50000

TOTAL LAB HR LENSES 5000
TOTAL LAB HR MIRRO 5000
TOTAL HRS 10000

LAB O/H RATE 5

PRODCUTS HRS O/H

LENSES 200 1000
MIRROR 200 1000
1 TRADITIONAL METHOD

MACHINE HOUR RATE = TOTAL O/H

TOTAL MACHINE HOURS

1988000
140000

STATEMENT SHOWING COST PER UNIT

PARTICULARS A
OUTPUT (UNITS) 50000
MACHINE HOURS 20000
O/H COST @ Rs. 14.2 284000
O/H CPU 5.68

2 ABC METHOD

CALCULATION OF COST DRIVER RATES

1 MACHINE HOUR RATE TOTAL VOLUME RELATED O/H

TOTAL MACHINE HOURS

2 SETUP RATE TOTAL SETUP RELATED O/H

TOTAL NO OF SETUPS

3 PURCHASE ORDER RATE TOTAL PURCHASE ORDER O/H

TOTAL NO OF PURCHASE ORDER

STATEMENT SHOWING CPU

PARTICULARS
VOLUME RELATED COST
SETUP RELATED COST
PURCHAE RELATED COST
TOTAL O/H
TOAL NO OF UNITS
CPU
ACHINE HOURS

14.2

B
60000
120000
1704000
28.4

OLUME RELATED O/H 550000 3.93

ACHINE HOURS 140000

TUP RELATED O/H 820000 12812.5

O OF SETUPS 64

RCHASE ORDER O/H 618000 1136.03

O OF PURCHASE ORDER 544

A B
78571.43 471428.6
256250 563750
181764.7 436235.3
516586.1 1471414
50000 60000
10.33 24.52
C COMMENTS

PARTICULARS A B C D
CPU AS PER TRADITIONAL 124 108 83 74
CPU AS PER ABC 96.88 101.38 98.13 106.23

DIFFERENCE 27.12 6.62 -15.13 -32.23

IT IS OBSERVED THTAT THERE HAS BEEN OVER CHARGING IN PRODUCT A &B AND
UNDER CHARGING IN PRODUCTS C&D
A TRADITIONAL METHOD

MACHINE HOUR RATE= TOTAL O/H 110592

TOTAL MACHINE HOURS 6144

TOTAL MACHINE HOURS= (720X4 + 600X3 + 480X2 + 504X1)

STATEMENT SHOWING TOTAL COST

PARTICULARS A B C D
DM 42 45 40 48
DL 10 9 7 8
O/H 72 54 36 18
CPU 124 108 83 74
TOTAL UNITS 720 600 480 504
TOTAL COST 89280 64800 39840 37296

B ACTIVITY BASED COSTING

SETUP RECEIVINGINSPECTION
MACHINE OPERATION(4:3:2) 28000 21000 14000

PARTICULARS AMOUNT DRIVERS NO COST PER DRIVER

SET UP 48000 NO OF PROD RUNS 96 500
STORE RECEIVING 36000 REQISITION RAISED 200 180
INSPECTION 24000 NO OF PROD RUNS 96 250
MATERIAL HANDELIN 2592 ORDERS EXECUTED 192 13.5

PRODUCTION RUN
A 30 C 20
B 25 D 21

STATEMENT SHOWING TOTAL COST

PARTICULARS A B C D
DM 30240 27000 19200 24192
DL 7200 5400 3360 4032
SETUP 15000 12500 10000 10500
STORE RECEIVING 9000 9000 9000 9000
INSPECTION 7500 6250 5000 5250
MATERIAL HANDELIN 810 675 540 567
TOTAL COST 69750 60825 47100 53541
TOTAL UNIT 720 600 480 504
CPU 96.88 101.38 98.13 106.23

NO OF ORDERS EXECUTED
A 60 C 40
B 50 D 42
 18 PER HOUR

6144 HOURS