ABC of Expense and its break up by Activity category

Expense
Category Percentage Breaksup Activity cost Category Expense
Indirect Labor $ 20,000.00 50% Machine Runs $ 10,000.00
40% Setup Time $ 8,000.00
10% Parts Administation $ 2,000.00
Fringe Benefits $ 16,000.00 50% Direct Labour Fringe $ 8,000.00
50% Indirect Labour Fringe $ 8,000.00
Compute Systems $ 10,000.00 80% Machine Runs $ 8,000.00
20% Parts Administation $ 2,000.00
Machinery $ 8,000.00 100% Support $ 8,000.00
Maintainance $ 4,000.00 100% Support $ 4,000.00
Energy $ 2,000.00 100% Support $ 2,000.00
Total $ 60,000.00 $ 60,000.00

ABC by Activity cost category

Expense Sub
Category Expense
Machine Runs $ 18,000.00
Setup Time $ 8,000.00
Part Administration $ 4,000.00
Support $ 14,000.00
Direct Labour Fringe $ 8,000.00
Indirect Labor Fringe $ 8,000.00
$ 60,000.00

CA Assignment Kshitij Gupta 2023B2PGPMX012

Cost break up of all color pen showing cost price of all pens

Blue Black Red Purple Total

Production Sales Volume 50000 40000 9000 1000 100000
Ratio 0.5 0.4 0.09 0.01
Unit selling Price 1.5 1.5 1.55 1.65
Materrials-unit cast 0.5 0.5 0.52 0.55
Direct labor hrs/unit 0.02 0.02 0.02 0.02 2000
Machine hours/unit 0.1 0.1 0.1 0.1 10000
Production Runs 50 50 38 12 150
Setup time/run 4 1 6 4
Total setup time(Hours) 200 50 228 48 526
Parts Administation 1 1 1 1 4

Sales $ 75,000.00 $ 60,000.00 $ 13,950.00 $ 1,650.00 $ 1,50,600.00

Material Cost $ 25,000.00 $ 20,000.00 $ 4,680.00 $ 550.00 $ 50,230.00
Direct Labor $ 10,000.00 $ 8,000.00 $ 1,800.00 $ 200.00 $ 20,000.00
Overhead @ 300%
Machine Runs $ 9,000.00 $ 7,200.00 $ 1,620.00 $ 180.00 $ 18,000.00
Setup time $ 3,041.83 $ 760.46 $ 3,467.68 $ 730.04 $ 8,000.00
Part Administration $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 4,000.00
Direct Labour Fringe $ 4,000.00 $ 3,200.00 $ 720.00 $ 80.00 $ 8,000.00
Indirect Labout Fringe $ 4,000.00 $ 3,200.00 $ 720.00 $ 80.00 $ 8,000.00
Support $ 7,000.00 $ 5,600.00 $ 1,260.00 $ 140.00 $ 14,000.00
Total Operating Cost $ 63,041.83 $ 48,960.46 $ 15,267.68 $ 2,960.04 $ 1,30,230.00
Total Operating Profit $ 11,958.17 $ 11,039.54 $ -1,317.68 $ -1,310.04
Unit cost price $ 1.26 $ 1.22 $ 1.70 $ 2.96

Conclusions

CA Assignment Kshitij Gupta 2023B2PGPMX012

 - Old costing system proves that selling price of Blue and black pen is above cost price where as red and purple pen are being sold at loss.
- Allocating different cost to Overhead cost broke down the numbers to realize that even though overall profit is higher, costing of red and purple
pens are not sold at right price. All the margin which were equally distributed among all colors should be broken down by efforts.

CA Assignment Kshitij Gupta 2023B2PGPMX012