Customer

Orders
Production Depatment

Indirect factory wages 500,000 25%

Factory Eqipment depreciation 300,000 20%
factory utilities 120,000 0%
Factory building lease 80,000 0%
1,000,000
General Administrative Department
Administrative wages and salaries 400,000 15%
Office eqipment depreciation 50,000 30%
Administrative building lease 60,000 0%
510,000
Marketing Department
Marketing wages and salaries 250,000 22%
Selling expenses 50,000 10%
300,000
TOTAL OVERHEAD COST 1,810,000
Product Order Customer Other Totals
Design Size Relations

40% 20% 10% 5% 100%

0% 60% 0% 20% 100%
10% 50% 0% 40% 100%
0% 0% 0% 100% 100%

5% 10% 30% 40% 100%

0% 0% 25% 45% 100%
0% 0% 0% 100% 100%

8% 0% 60% 10% 100%

0% 0% 70% 20% 100%
 Customer Orders
Production Depatment
Indirect factory wages 125,000
Factory Eqipment depreciation 60,000
factory utilities 0
Factory building lease 0

General Administrative Department

Administrative wages and salaries 60,000
Office eqipment depreciation 15,000
Administrative building lease 0

Marketing Department
Marketing wages and salaries 55,000
Selling expenses 5,000
TOTAL 320,000
 Other Totals
Product Design Order Size Customer Relations

200,000 100,000 50,000 25,000 500,000

0 180,000 0 60,000 300,000
12,000 60,000 0 48,000 120,000
0 0 0 80,000 80,000

20,000 40,000 120,000 160,000 400,000

0 0 12,500 22,500 50,000
0 0 0 60,000 60,000

20,000 0 150,000 25,000 250,000

0 0 35,000 10,000 50,000
252,000 380,000 367,500 490,500 1,810,000
Activity Cost Pools Total Cost Total Activity
Customers orders 320,000 1000 orders
Product design 252,000 400 designs
Order size 380,000 20,000 MHs
Customer relations 367,500 250 customers
Other 490,500 Not Applicable

PRODUCT LINE:
1) STANDARD STANCHIONS
this new product line does not require any design resourses
30,000 units were ordered comprising 600 separate orders
Each product requires 35minutes for a total of 17,500 MHs
Activity Rate
$320 per order
$630 per design
$19 per MHs
$1,470 per customer
Not Applicable

2) CUSTOM COMPASS HOUSING

Requires new design resourses
400 orders for this product.
400 custom design prepared. One custom design was prepared for each order.
1,250 units were produced which requires 2 MH/unit for a total of 2,500 MHs.
ch order.
00 MHs.
OVERHEAD COST FOR THE STANDARD STANCHIONS

Activity Cost Pools Activity Rate Activity ABC Cost

Customers orders $320 per order 600 orders 192000
Product design $630 per design 0 designs 0
Order size $19 per MHs 17500 MHs 332500
TOTAL 524500

OVERHEAD COST FOR THE CUSTOM COMPASS HOUSING

Activity Cost Pools Activity Rate Activity ABC Cost

Customers orders $320 per order 400 orders 128,000
Product design $630 per design 400 designs 252,000
Order size $19 per MHs 2,500 MHs 47,500
TOTAL 427,500
OVERHEAD COSTS ASSIGNED TO PRODUCTS

STANDARD STANCHIONS
Customers orders 192,000
Product design 0
Order size 332,500
Subtotal 524,500

OVERHEAD COSTS NOT ASSIGNED TO PRODUCTS

Costomer relations (250*1,470)

Other
Subtotal
Total overhead cost
CUSTOM COMPASS HOUSING Total
128,000 320,000
252,000 252,000
47,500 380,000
427,500 952,000

367,500
490,500
858,000
1,810,000
GIVEN:
STANDARD CUSTOM COMPASS Total
STANCHIONS HOUSING

Sales $2,660,000 540,000 3,200,000

Direct costs:
DM 905,000 69,500 975,000
DL 263,750 87,500 351,250
Shipping 60,000 5,000 65,000
 Product Margins-ABC costing
STANDARD CUSTOM COMPASS
STANCHIONS HOUSING
Sales 2,660,000 540,000
Costs:
DM 905,000 69,500
DL 263,750 87,500
Shipping 60,000 5,000
Customer orders 192,000 128,000
Product Design 0 252,000
Order size 332,500 47,500
TOTAL COST 1,753,750 589,500
Product Margins 906,250 -49,500

Overhead cost NOT assigned to

products
Customer relations
other
Total
Net operating income
TOTAL

3,200,000

2,343,250
856,750

367,500
490,500
858,000
-1,250
Product Margins-Traditional Cost system
STANDARD
STANCHIONS

Sales 2,660,000
COGS:
DM 905,500
DL 263,750
MOH 875,000
Total 2,044,250
Product Margin 615,750
Selling and adminstrative
Net operating income

Difference between ABC and Traditional product cost

STANDARD
STANCHIONS

Product Margins-traditional 615,750

Product Margins-ABC 906,250
Changes 290,500
 CUSTOM COMPASS
HOUSING TOTAL

540,000 3,200,000 Overhead Rate = Est. Manufacturing

1,000,000/20,000
69,000 975,000 50 per MH
87,000 351,250
125,000 1,000,000
282,000 2,326,250
258,000 873,750
875,000
-1,250

product cost

CUSTOM COMPASS
HOUSING

258,000
-49,500
307,500
= Est. Manufacturing OH/est MHs
1,000,000/20,000
50 per MH