Professional Documents
Culture Documents
Use The Information Provided Here To Answer The Questions in Parts 1, 2, and 3 of The Mini-Project
Use The Information Provided Here To Answer The Questions in Parts 1, 2, and 3 of The Mini-Project
Blackhawk Company manufactures and sells many different types of tables. Blackhawk uses a
single production facility to manufacture its tables. Historically, indirect costs have been allocated to
products using a traditional method. The allocation base is direct labor dollars. The overhead rate is
predetermined, based on budgeted volumes and budgeted direct labor.
For the upcoming year, Blackhawk compiled the following projected per-unit information for one of its
tables the Stanley model (named for its original designer). The following information is based on
the traditional costing system:
Selling price
Direct materials
Direct labor
Indirect costs
Profit per unit
$900
$250
$120
$355
$175
The CFO has suggested that an activity-based costing system could be valuable to help facilitate
strategic and operational decisions for the coming year. She obtained the following additional,
projected information for the next year. Note: These totals are company-wide, not just for the
Stanley model.
Activity
Setups
Machine-related
Packing
Cost Driver
# batches
# machine-hours
# of shipments
Cost
$500,000
$4,410,000
$60,000
Total
725 batches
65,000 MHs
2,500 shipments
Finally, the following information is projected for the Stanley model for the next year:
Number of units per batch
Number of machine hours per unit
Number of units per shipment
125
0.5
2
Use the information provided here to answer the questions in Parts 1, 2, and 3 of the MiniProject.
Kruger Corporation manufactures seat cushions for stadium and concert venue seating. The critical
part of the manufacturing process uses a single machine that produces three different colors (forest
green, navy blue, and purple), yielding three product lines.
The forecasted gross margins and operating income for each product line are presented in the table
below:
Sales
Direct Materials
Direct Labor
Var OH - mftg
Fixed OH - mftg
Total Gross Margin
Var OH - non-mftg
Fixed OH - non-mftg
Operating Income
Number of Units to be Sold
Forest Green
Navy Blue
Purple
Total
142,000
38,000
96,000
26,100
123,000
28,400
361,000
92,500
18,000
14,500
12,300
9,500
13,000
10,310
43,300
34,310
13,500
58,000
2,020
46,080
5,700
65,520
21,290
169,600
24,300
16,000
18,900
11,480
20,670
15,650
63,870
43,130
17,700
6,600
15,700
2,475
29,200
1,925
62,600
11,000
Assume that the market will not substantially change in its preference for different colors going
forward, and that the following statement from the chief financial officer is valid.
"Based on my experience, there is no way to split up fixed costs among the products in a truly
representative way. Whatever allocation exists is likely just arbitrary."