_premier - 7000 5000 12000 FOH rate 6.071429 7.5 Existing...

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1 hours required 6 1 3 2 A B C D 15 5 10 5 30 5 15 10 15 7.5 5 7.5 60 17.5 30 22.5 fixed overhead 22.5 3.75 11.25 7.5 45000/12000 *3.75 Total cost 82.5 21.25 41.25 30 Existing unit cost 85 16.67 45 28.33 less total unit cost 82.5 21.25 41.25 30 Profit per unit 2.5 -4.58 3.75 -1.67 0 The product A and C are showing more profit while B and D is showing more loss in the changed system than used be company earlier.  However no impact on overall profitability of the company. Earlier the products with high labor hours were allocated higher unit cost than existing proposed system, as in the proposed system only the fixed cost is affected while variable cost are being charged on actual basis. 2 hours required 6 1 3 2 A B C D 15 5 10 5 30 5 15 10 Applied 36.43 6.07 22.5 15 Total cost 81.43 16.07 47.5 30 Total variable overhead 22500 12500 35000 Fixed overhead 20000 25000 45000 total 42500 37500 80000 direct labor hours
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Unformatted text preview: 7000 5000 12000 FOH rate 6.071429 7.5 Existing unit cost 85 16.67 45 28.33 less total unit cost 81.43 16.07 47.50 30.00 Profit per unit 3.57 0.60-2.5-1.67 The profitability has been shifted on pool basis, the pool A is showing profit while pool B is showing loss however overall profitability is once again the same. It seem better than discussed in 1 as the pool with high labor hours which is A has the overhead application rate less than the pool B which has fewer labor hours. However the most appropriate is the ABC costing if the cost detail and related drivers of fixed cost is available Material Labor Variable OH Unit var. cost Material Labor...
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