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    Expense Category Expense Cost Driver Total Cost Driver

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    Rustash
    The document summarizes the allocation of plant-wide overhead costs across various production activities and products. Total overhead costs of $60,000 are allocated based on cost drivers such as the number of production runs, setup time, machine hours, and number of products. This allocation is then used to calculate the overhead costs assigned to four product lines. The document concludes by recommending discontinuing two underperforming product lines and increasing production runs of the two best sellers to reduce overhead costs.

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    Expense Category Expense Cost Driver Total Cost Driver

    Uploaded by

    Rustash
    13 views6 pages
    The document summarizes the allocation of plant-wide overhead costs across various production activities and products. Total overhead costs of $60,000 are allocated based on cost drivers such as the number of production runs, setup time, machine hours, and number of products. This allocation is then used to calculate the overhead costs assigned to four product lines. The document concludes by recommending discontinuing two underperforming product lines and increasing production runs of the two best sellers to reduce overhead costs.

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    ghgh

    Original Title

    MA ABC costing

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    The document summarizes the allocation of plant-wide overhead costs across various production activities and products. Total overhead costs of $60,000 are allocated based on cost drivers such as the number of production runs, setup time, machine hours, and number of products. This allocation is then used to calculate the overhead costs assigned to four product lines. The document concludes by recommending discontinuing two underperforming product lines and increasing production runs of the two best sellers to reduce overhead costs.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    13 views6 pages

    Expense Category Expense Cost Driver Total Cost Driver

    Uploaded by

    Rustash
    The document summarizes the allocation of plant-wide overhead costs across various production activities and products. Total overhead costs of $60,000 are allocated based on cost drivers such as the number of production runs, setup time, machine hours, and number of products. This allocation is then used to calculate the overhead costs assigned to four product lines. The document concludes by recommending discontinuing two underperforming product lines and increasing production runs of the two best sellers to reduce overhead costs.

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    You are on page 1of 6

    Plant wide overhead cost allocation based on various activities

    Expense Category Expense Cost Driver Total Cost driver


    Indirect labour - scheduling runs 10000 No. of runs 150
    Indirect labour - changeover 8000 Setup time 526
    Indirect labour - records 2000 No. of products 4
    Fringe benefits 16000 Total labour hours Add 40% on LH
    computer systems/run 8000 No. of runs 150
    computer systems - records 2000 No. of products 4
    machinery 8000 Machine hours 10000
    maintenance 4000 Machine hours 10000
    energy 2000 Machine hours 10000
    TOTAL 60000
    $/unit driver
    66.666666667
    15.209125475
    500

    53.333333333
    500
    0.8
    0.4
    0.2
    Total overhead cost per cost driver

    No. of runs

    Indirect labour - scheduling runs 66.66667


    40% Frings on indirect labour 26.66667
    Computer systems / runs 53.33333
    Total OH cost / #Runs 146.6667

    Setup time

    Indirect labour - changeover 15.20913


    40% Frings on indirect labour 6.08365
    Total OH cost / Setup hours 21.29278

    Machine hours

    Machinery 0.8
    Maintenance 0.4
    Energy 0.2
    Total OH cost / Machine hours 1.4

    Products

    Indirect labour - records 500


    40% Frings on indirect labour 200
    Computer systems - records 500
    Total OH cost / product 1200
    Overhead cost allocation based on resource utilization

    blue black red purple Total OH

    runs 50 50 38 12
    cost/run 146.6667 146.6667 146.6667 146.6667
    total run OH 7333.333 7333.333 5573.333 1760 22000

    setup hrs 200 50 228 48


    cost / H 21.29278 21.29278 21.29278 21.29278
    Total setup OH 4258.555 1064.639 4854.753 1022.053 11200

    Machine hours 5000 4000 900 100


    cost / Machine Hour 1.4 1.4 1.4 1.4
    Total Machine hr OH 7000 5600 1260 140 14000

    product 1 1 1 1
    cost / product 1200 1200 1200 1200
    Total product OH 1200 1200 1200 1200 4800

    DL 10000 8000 1800 200


    Fringe on DL 4000 3200 720 80 8000

    Total OH 23791.89 18397.97 13608.09 4202.053 60000


    Revised income statement

    blue black red purple Total


    Sales 75000 60000 13950 1650 150600

    Material cost 25000 20000 4680 550 50230


    DL cost 10000 8000 1800 200 20000
    Total direct COGS 35000 28000 6480 750 70230

    Indirect OH costs 23791.8885 18397.9721 13608.086 4202.0532 60000

    Ttoal costs 58791.8885 46397.9721 20088.086 4952.0532 130230

    Operating income 16208.1115 13602.0279 -6138.086 -3302.053 20370

    Percentage of total sales 50 40 9 1 100

    Recommendations
    Red and Purple pens should be discontinued
    Make production runs of blue and black color longer to minimize physical changeovers and thereby reduce associated overhea
    y reduce associated overheads

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