UnitCostUnderABCCostingMethod

BrightandShinyDogCollars

ActivityCostPools
Purchasing
Receiving
Cutting
Assembling
Finishing
Packingandshipping

Step1

ActivityCostPools
Purchasing
Receiving
Cutting
Assembling
Finishing
Packingandshipping

Step2a

ActivityCostPools
Purchasing
Receiving
Cutting
Assembling
Finishing
Packingandshipping

Estimated
Overhead

CostDrivers
Orders
Yards
Yards
Pieces
Pieces
Cartons

3,000
500
1,800
2,400
1,500
800
$10,000

10
20
500
500
500
50

Expected
UseofCost
Drivers

Estimated
Overhead
3,000
500
1,800
2,400
1,500
800
$10,000

Expected
UseofCost
Drivers

/
/
/
/
/
/

10
20
500
500
500
50

Cost
perunit
=
=
=
=
=
=

CalculationforSimpleCollar
Cost
perunit
Simple
300.00
25.00
3.60
4.80
3.00
16.00

X
X
X
X
X
X

3
6
225
225
225
15

ExpectedUse
ofCostDrivers
perProduct
Simple
Jeweled
3
7
6
12
225
275
225
275
225
275
15
35

300.00
25.00
3.60
4.80
3.00
16.00

Costper
Unit
=
=
=
=
=
=
/

900.00
150.00
810.00
1,080.00
675.00
240.00
$3,855.00
225
$17.13

TotalOverhead
UnitsProduced
OverheadCost
PerUnit

Step2b

ActivityCostPools
Purchasing
Receiving
Cutting
Assembling
Finishing
Packingandshipping

CalculationforJeweledCollar
Cost
perunit
Jeweled
300.00
25.00
3.60
4.80
3.00
16.00

X
X
X
X
X
X

7
12
275
275
275
35

Costper
Unit

=
=
=
=
=
=

3,600.00
6,875.00
990.00
1,320.00
105.00
560.00
$13,450.00
/
275
$48.91

UnitProductCostUnderABCCostingMethod

DirectMaterial
DirectLabor
Overhead
TotalUnitCost

Simple
0.50
3.50
17.13
$ 21.13

Jeweled
10.00
7.00
48.91
$65.91

TotalOverhead
UnitsProduced
OverheadCost
PerUnit

StepbyStepInstructions
Step1.Createachartwiththeseheadings

Total
Expected
UseofCost
Drivers

ExpectedUse
ofCostDrivers
perProduct.
Product1Product2

Estimated
ActivityCostPoolsCostDrivers
Overhead

Step2.Totalthenumberofexpecteduseofcostdriversperproductundereachoftheactivitycost
poolstogetthetotalexpecteduseofcostdriversforeachactivitycostpool.

Step3.DividetheEstimatedOverheadbytotalexpecteduseofcostdriversforeachactivitycostpoolto
getaperunitcost.

Step4.Takeeachoneofproduct1sactivitycostpoolsandmultiplybytheperunitcostfromstep3.

Step5.Totalthecompletecostperunitandthendividebythenumberproducedtogetaperunitcost.

Step6.Repeatstep4usingProduct2andthenrepeatstep5togetaperunitcostforproducttwo.

Step7.Createachartforproduct1andproduct2andlabelthesideheadingsDirectMaterials,Direct
LaborandOverhead.Fillinthenumbersandusethecalculatedamountsformthefirstsixstepstofillin
theoverheadline.

Product2

Product1

DirectMaterial

DirectLabor

Overhead

TotalUnitCost

Step8.Nowtotaldowneachoftheproductcolumnstogetattotalunitcostforeachproduct.