ABCaccounting - II 1 Material 18000 Labor 16500 Overhead...

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1 Envelopes Cups Total Sales $15,000,000 $16,800,000 $31,800,000 less Direct Cost $8,250,000 $8,750,000 $17,000,000 Production overhead $4,014,000 $1,003,500 $5,017,500 Gross profit $2,736,000 $7,046,500 $9,782,500 Rate of return 18.24% 41.94% 2 Envelopes Cups Total Sales $15,000,000 $16,800,000 $31,800,000 less Direct Cost $8,250,000 $8,750,000 $17,000,000 Poo1 1 $1,008,000 $252,000 $1,260,000 5.04 Pool 2 $414,000 $1,843,500 $2,257,500 12 Pool 3 $200,000 $1,300,000 $1,500,000 200 Total cost $9,872,000 $12,145,500 $22,017,500 $0 Gross profit $5,128,000 $4,654,500 $9,782,500 Rate of return 34.19% 27.71% 3 The company should use ABC costing as it gives true picture of the rate of return on each produc the cost is allocated on the basis of resources used. However there is no change in overall profit it may affect the future profitability if company sells more product with higher rate of return which i
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Unformatted text preview: II 1 Material 18000 Labor 16500 Overhead 1500 Setup 340000 Handling 100000 Total cost 476000 Per unit cost 2380 If company has enough excess capacity to produce more then the any price more than 2380 per e accepted, because other cost such as product level and facility level cost are irrelevant in the situ 2 Any selling price more than 2380 would have increase profit of the company if company do have e in case of the capacity is not in excess than all batch level and facility level cost will become relev income would have been negative if the price is offered which was acceptable in the above situati excess capacity ct, because t of the company. But is of envelope, not of cups. envelop should be uation. excess capacity, but vant and the company tion of having...
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This note was uploaded on 07/29/2011 for the course ACT 5060 taught by Professor Forney during the Winter '11 term at North South University.

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ABCaccounting - II 1 Material 18000 Labor 16500 Overhead...

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