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Management Accounting II Case Study

Morrissey Forgings, Inc.


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Question 1 Activity Based xxx Manufacturing Cost


Activity Based Manufacturing Costs - Total Details Units Materials Labour & Benefits Variable Overhead Fixed Overhead Depreciation Rent Ovens 20,000 9,00,000 11,00,000 4,80,000 3,55,556 2,44,445 7,02,000 37,82,001 Stoves 25,000 10,00,000 12,50,000 6,00,000 4,44,444 3,05,555 4,68,000 40,67,999 Total 45,000 19,00,000 23,50,000 10,80,000 8,00,000 5,50,000 11,70,000 78,50,000

Click to edit Master Support style subtitle Factory


Total

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Question 1 Activity Based xxx Manufacturing Cost


Activity Based Manufacturing Costs - Per Unit Details Materials Labour & Benefits Variable Overhead Fixed Overhead Depreciation Rent Total Factory Support Ovens 45 55 24 18 12 35 189 Stoves 40 50 24 18 12 19 163 Total 85 105 48 36 24 54 352

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Question 2 Activity Based Shipping Cost


Shipping Cost in 1983 = $10,00,000 No of units sold in 1983 in Core Area = 30,000 Shipping Cost/Unit in Core Area in 1983 = $33.33 Shipping Cost in 1985 = $25,00,000 No. of stoves sold in 1985 in Core Area = 25,000 No. of oven sold in 1985 in Core Area = 5,000 No. of oven sold in 1985 in Non-Core Area = 15,000 Shipping Cost in Core Area = $10,00,000

Click to edit Master Based style Activity subtitle Shipping

Cost
Per Unit Shipping Costs 33.33 100.00

Stove (No. of Ovens (No. of Particulars Units) Units) Core Non-core


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Total Shipping Costs 1,000,000 15,000,000

25,000

5,000 15,000

Question 3 Activity Based Selling Cost


Selling Cost in 1983 = $12,50,000 No. of orders procured in 1983 in Core Area = 3,000 Shipping Cost/Unit in Core Area in 1983 = $416.67 Shipping Cost in 1985 = $31,25,000 No. ofClick to edit Master subtitle stove in 1985 orders procured for style = 2,500 Selling cost for stoves = $10,41,667 No. of orders procured for ovens in 1985 = 10,000 Shipping Cost in Core Area = $20,83,333
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Question 4 Break-Even Calculation


Fixed Costs : Manufacturing Overheads = Dep. + Rent + Factory Support General Expenses Contribution = Sales-Variable Cost = Fixed Cost + Profit Details Ovens Sales COGS Click Gross Margin to edit Master subtitle style Selling Cost Shipping Cost Sales Commission General Expenses Profit Before Tax 7/29/12 7,000,000 3,782,001 3,217,999 2,083,333 833,333 350,000 245,000 -293,667

Stoves 7,500,000 4,067,999 3,432,001 1,041,667 1,666,667 375,000 245,000 103,667

Fixed Manufacturing Overheads Manufac. Overhead Depreciation Rent Factory Support

OVEN 355,556 244,444

STOVES 444,444 305,556

702,000 468,000 1,302,000 1,218,000 + + 245,000 245,000

General Expenses Total Fixed Costs Contribution Contribution/Unit Break Even Units
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1,547,000 1,463,000 1,253,333 1,566,667 62.66665 62.66668 24686.18 23345.74

Thank You
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