COST PER UNIT TRADITIONAL METHOD

PARTICULARS P Q R
Direct materials 90 80 120
Direct labour 80 240 160
Protection overheads 60 108 84
COST PER UNIT 230 428 364

COST PER UNIT ABC METHOD

PARTICULARS P Q R
Production (units) 3000 5000 20000
Direct materials 270000 400000 240000
Direct labour 240000 120000 320000
Macine cost 54000 162000 504000
Set up csot 192000 96000 192000
Inspection cost 480000 192000 288000
Purchase cost 45000 75000 120000
COST PER UNIT 427 425 335.2
TOTAL COST 1281000 2125000 6704000

WORKING NOTES

PARTICULARS P Q R TOTAL
Production (units) 3000 5000 20000
Batch size (units) 150 500 1000
No. of batches 20 10 20 50
No. of purchase order per batch 3 8 10
Total purchase order 60 100 160 320
No. of inspection per order 5 4 3
TOTAL 100 40 60 200

PARTICULARS P Q R
Machine hours per unit 10 13 14
Production 3000 5000 20000
TOTAL MACHINE HOURS 30000 90000 280000

COST POOL PERCENTAGE OVERHEADS COST DRIVER COST DRIVER

Set up 20% 480000 No. of batches 50
Inspection 40% 960000 No. of inspections 200
Purchase 10% 240000 No. of purchases 320
Machine Hour 30% 720000 Machine hours 400000
COST DRIVER RATIO
9600 per setup
4800 per insp
750 per purchase
180 per machine hr
i)

STATEMENT OF INCOME AND GROSS MARGIN

PARTICULARS SUPERMART DRUGSTORE

Revenue 28041750 23821875
Less: COGS 27225000 22687500
Less: Other operating costs
Operating income
Gross margin 2.91% 4.76%
OPERATING INCOME

ii)

COMPUTATION OF RATE PER UNIT

Customer purchase order processing 40 per order

Line item ordering 3 per
Store delivery 50 per delivery
Cartoons dispatched 1 per dispatch
Shelf stocking at customer store 16 per hour

iii)

OPERATING ITEM STATEMENT

PARTICULARS SUPERMART DRUGSTORE

Gross margin 816750 1134375
Operating cost 162910 190410
Operating income 653840 943965
OPERATING INCOME PERCENTAGE 2.33% 3.95%

OPERATION COST TO REVENUE

PARTICULARS PERCENTAGE
General super market 0.58%
Drugstore 0.80%
Chemist 3.17%
CHEMIST TOTAL
14973750 66837375
13612500 63525000
827970
2484405
9.09% 4.96%
3.72

CHEMIST
1361250
4746500
886600
5.92%
i) STATEMENT OF INCOME AND OPERATING ICNOME

PARTICULARS SOFT DRINK FRESH PRODUCE PACKAGED FOODS

Revenue 3967500 10503000 6049500
COGS 3000000 7500000 4500000
Support cost 900000 2250000 1350000
TOTAL COST 3900000 9750000 5850000
Operating income 67500 753000 199500
Operating income as % of revenue 1.70% 7.17% 3.30%

ii) STATEMENT OF INCOME AND OPERATING INCOME AS PERCENTAGE

PARTICULARS SOFT DRINK FRESH PRODUCE PACKAGED FOODS

Revenue 3967500 10503000 6049500
COGS 3000000 7500000 4500000
Bottle return cost 60000 0 0
Ordering cost 180000 420000 180000
Delivering cost 120000 876000 264000
Shelf stocking cost 54000 540000 270000
Customer support cost 126000 1104000 306000
TOTAL COST 3540000 10440000 5520000
Operating income 427500 63000 529500
Operating income as % of revenue 10.78% 0.60% 8.75%

WORKING NOTES

PARTICULARS AMT
Total support cost
Bottles return 60000
Ordering 780000
Delivering 1260000
Shelf stocking 864000
Customer support 1536000
TOTAL SUPPORT COST 4500000
 TOTAL
20520000
15000000
4500000
19500000
1020000
4.97%

AGE

TOTAL
20520000
15000000
60000
780000
1260000
864000
1536000
19500000
1020000
4.97%
 PARTICULAR A B
Cases sold 4680 19688
Revenues 505440 2126304
Discount 35438
COGS 421200 1771920

CUSTOMER LEVEL OPERATING ACTIVITES COSTS

PARTICULAR A B
Order taking costs 11250 19750
Customer visit cost 1200 1800
Delivery vehicle cost 1150 1035
Production handling cost 17550 73830
Cost of expediting
TOTAL COST OF CUSTOMER LEVEL OPERATING ACTIVITES 31150 96415

i)

COMPARISION OF CUSTOMER LEVEL OPERATING INCOME

PARTICULAR A B
Revenue 505440 2126304
Less: Discount 35438
Revenue 505440 2090866
Less: COGS 421200 1771920
Gross margin 84240 318946
Less: Customer level cost 31150 96415
CUSTOMER LEVEL OPERATING INCOME 53090 222531

ii)

SALES VOLUME DISCOUNT PER CASE

A 0
B 1.8
C 9
D 3.6
E 10.8
 C D E
136800 71550 8775
14774400 7727400 947700
1231200 57580 94770
12312000 6439500 789750

OSTS

C D E
22500 18750 22500
3600 1200 1800
1725 2300 3450
513000 268313 32906
2250
540825 290563 62906

G INCOME

C D E
14774400 7727400 947700
1231200 57580 94770
13543200 7669820 852930
12312000 6439500 789750
1231200 1230320 63180
540825 290563 62906
690375 939757 274
i)

TRADITIONAL ABSORPTION COST

BABYSOFT
PARTICULARS TOTAL
GOLD PEARL DIAMOND
Prosuction of soaps 4000 3000 2000 9000
Direct labour 30 40 60
Direct labour hours 2000 2000 2000 6000

BABYSOFT
PARTICULARS
GOLD PEARL DIAMOND
Direct costs
Direct Labour 5 6.666667 10
Direct Material 167.5 215.5 248.5
Production overhead 16.5 22 33
TOTAL UNIT COST 189 244.1667 291.5
No. of units 4000 3000 2000
TOTAL COST 756000 732500 583000

WORKING NOTES

BABYSOFT
PARTICULARS
GOLD PEARL DIAMOND
Essential oils 120 165 195
Cocoa butter 40 40 40
Filtered Water 4.5 4.5 4.5
Chemicals 3 6 98
TOTAL COST 167.5 215.5 337.5

ii)

ACTIVITY BASED COST

BABYSOFT
PARTICULARS TOTAL
GOLD PEARL DIAMOND
Quantity 4000 3000 2000 9000
Weight per unit 108 106 117
Total weight 432000 318000 234000 984000
Direct labour 30 40 60
Direct labour hours 2000 2000 2000 6000
Machine operations Per unit 5 5 6
TOTAL OPERATIONS 20000 15000 12000 47000

Unit cost under ABC

BABYSOFT
PARTICULARS
GOLD PEARL DIAMOND
Direct costs
Direct Labour 5 6.67 10
Direct Material 167.5 21.5 248.5
Production overhead
Forklifting cost 6.48 6.36 7.02
Supervising cost 5 6.67 10
Utilities 8.5 8.5 10.2
TOTAL UNIT COSTS 192.48 49.7 285.72
No. of units 4000 3000 2000
TOTAL COSTS 769920 149100 571440
Overhead rate per direct labour = Budgeted overheads/budgeted labour hours 33