Proj 2- analysis soln posting v2

Proj 2- analysis soln posting v2 - Part 1 Production...

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Part 127 Part 234 total Current Allocation System (Traditional base on DLH total total Production 500,000 100,000 Part 127 Part 234 Part 127 Part 234 Selling Price $31.86 $24.00 Selling Price/unit $31.86 $24.00 15,930,000 $2,400,000 Overhead per unit* $12.83 $5.77 DM and DL $9.53 $8.26 4,765,000 $826,000 Prime costs per unit $9.53 $8.26 Overhead: Number of production runs 100 200 300 rate $25.65 $25.65 $25.65 $26 Receiving orders 400 1,000 1,400 DLH/unit 0.5 0.225 250,000 $22,500 Machine hours 125,000 60,000 185,000 Overhead applied $12.83 $5.77 6,412,844 $577,156 Direct labor hours 250,000 22,500 272,500 Gross Profit $9.50 $9.97 4,752,156 $996,844 5,749,000 Engineering hours 5,000 5,000 10,000 Material moves 500 400 900 Part 3 Current Pricing with ABC Allocation: total total Part 127 Part 234 Part 127 Part 234 Part 2 Selling Price/unit $31.86 $24.00 15,930,000 $2,400,000 Overhead Cost Pools Cost driver ABC rates DM and DL $9.53 $8.26 4,765,000 $826,000 Setup costs $240,000 Production runs $800 Overhead: Material handling costs 900,000 Material moves 1000 Setup costs $0.16 1.60 80,000 $160,000 Machine costs 1,750,000 Machine hours 9.46 Material handling costs $1.00 4.00 500,000 $400,000 Receiving costs 2,100,000 Receiving orders 1500 Machine costs $2.36 5.68 1,182,432 $567,568 Engineering costs 1,500,000 Engineering hours 150 Receiving costs $1.20 15.00 600,000 $1,500,000 General Plant costs 500,000 NA Engineering costs $1.50 7.50 750,000 $750,000 Total $6,990,000 Direct Labor hours $25.65 total overhead $6.22 $33.78 3,112,432 $3,377,568 ABC profit / unit $16.11 ($18.04) 8,052,568 ($1,803,568) 6,249,000 Part E 25% Price increase Part 234 with ABC: total total Part 127 Part 234 Part 127 Part 234 Selling Price/unit $31.86 $30.00 15,930,000 $3,000,000 DM and DL $9.53 $8.26 4,765,000 $826,000 Overhead: Setup costs $0.16 $1.60 80,000 $160,000 Material handling costs $1.00 $4.00 500,000 $400,000 Machine costs $2.36 $5.68 1,182,432 $567,568 Receiving costs $1.20 $15.00 600,000 $1,500,000 Engineering costs $1.50 $7.50 750,000 $750,000 total overhead $6.22 $33.78 3,112,432 $3,377,568 ABC profit / unit $16.11 ($12.04) 8,052,568 ($1,203,568) 6,849,000 *breakeven selling price increase is 67% Part F (assumed none of the overhead is avoidable, Inc volume by 70,000) Drop Part 234 with ABC: total total Part 127 Part 234 Part 127 Part 234 Selling Price/unit $31.86 $0.00 18,160,200 $0 DM and DL $9.53 $0.00 5,432,100 $0 Overhead: Setup costs $0.42 $0.00 $240,000 $0 Material handling costs $1.58 $0.00 900,000 $0 Machine costs $3.07 $0.00 1,750,000 $0 Receiving costs $3.68 $0.00 2,100,000 $0 Engineering costs $2.63 $0.00 1,500,000 $0 General Plant 500,000 $0 total overhead $11.39 $0.00 6,490,000 $0 ABC profit / unit $10.94 $0.00 6,238,100 $0 6,238,100 Issues with changing sales levels How do the activities for each product vary with production? Ie, if production changes will the number of setups also change?
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Proj 2- analysis soln posting v2 - Part 1 Production...

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