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. The overhead for unframed prints is lower than under the traditional approach because there is not one cost pool but multiple and costs are allocated to specific activities. This means
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This note was uploaded on 04/04/2010 for the course FINANCE 1035503209 taught by Professor Potter during the Spring '10 term at Mt. Sinai Medicine.

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

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