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Case-21 - Answers for Team Case 2 1 Two reasons why to use...

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Answers for Team Case 2 1. Two reasons why to use an ABC system: a. The prints were not properly priced. The unfinished prints were making a very small profit margin even though there was a very large volume. The framed prints were the best quality but priced so low that the competition could not meet with a competitive price. b. The highest overhead costs were not from making the prints but from the technology area. The tech area has a website that requires separate computer servers and several IT professionals. Not to mention, there are two separate activities happening in the tech area; purchasing prints and materials and website optimization. 2. Activity Based Overhead Rates: a. Picking Prints is $0.03/print b. Inventory Selection and Management is $0.70/component c. Website optimization is $0.258/print capacity for unfinished & $4.128 /print capacity for framed. d. Framing and Matting Cost is $2.10 per component 3. Costs per print a. Lance Armstrong is $15.258 b. JohnElway print in steel frame is $35.528 c. Lambeau Field print in wood frame with mat is $49.028 4.
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