GROUP 1 SECTON A CLASSICAL PEN COMPANY CASE

GROUP MEMBERS- HARLEEN KAUR, NISHTHA NARANG, RAKESH GANDHI SOMIL GARG ,
SHUBHAM MEHRISHI, VAISHAKH P.

PARTICULAR BLUE BLACK RED PURPLE TOTAL

REVENUE 75000 60000 13950 1650 150600
MATERIAL COST 25000 20000 4680 550 50230
DIRECT LABOUR 10000 8000 1800 200 20000
OVERHEAD @ 300% 30000 24000 5400 600 60000
TOTAL COST 65000 52000 11880 1350 130230
TOTAL OPERATING
INCOME 10000 8000 2070 300 20370
VOLUME 50000 40000 9000 1000 100000
SELLING PRICE/ UNIT 1.5 1.5 1.55 1.65 1.5
COST PRICE/ UNIT 1.3 1.3 1.32 1.35 1.3
RETURN ON SALES 13.30% 13.30% 14.80% 18.20% 13.50%

The traditional cost price of pens are: -

Blue - $1.3
Black- $1.3
Red - $1.32
Purple- $1.35
Activity based costing
Income statement
PARTICULAR BLUE BLACK RED PURPLE TOTAL
SALES 75000 60000 13950 1650 150600
MATERIAL COST 25000 20000 4680 550 50230
DIRECT LABOUR
OVERHEADS 10000 8000 8000 200 20000
PRODUCTION RUN 7333 7333 5573 1760 22000
SETUP 4259 1064.63 4854.7 1022.05 11200
PARTS ADMINISTRATION 1200 1200 1200 1200 4800
SUPPORT 7000 5600 1260 140 14000
DIRECT LABOUR FRINGE 4000 3200 720 80 8000
TOTAL OPERATING COST 58792 46398 20088 4952 130230

TOTAL OPERATING INCOME 16208 13602 -6138 -3302 20370

RETURN ON SALE 21.60% 22.60% -44% -200% 13.50%

ABC/PER UNIT 1.17 1.15 2.23 4.95

SELLING PRICE/ UNIT 1.5 1.5 1.55 1.65