# Classic Pen Case Analysis

Submitted By maryaudy
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CLASSIC PEN COMPANY: DEVELOPING AN ABC MODEL
REVISED PRODUCT COSTS FOR THE FOUR PENS, BASED ON THE ACTIVITY INFORMATION COLLECTED BY DEMPSEY

Cost centres under ABC
Indirect labour=\$ 20,000 40% *20,000=8,000
Total indirect labour=\$ 28,000
Computer expenses=\$ 10,000
Machine expenses= \$ 8,000+ \$ 4,000+ \$ 2,000=\$ 14,000
Cost estimates/allocation under ABC Activity | Indirect labour | Computer expenses | Machine expenses | Total | Activity rate | Handle production runs | 50% | 14,000 | 80% | 8,000 | | | 22,000 | 150 | 146.7 | Set up time | 40% | 11,200 | | | | | 11,200 | 526 | 21.29 | Parts administration | 10% | 2,800 | 20% | 2,000 | | | 4,800 | 4 | 1200 | Machine support | | | | | 100% | 14,000 | 14,000 | 1000 | 1.4 | Total | | 28,000 | | 10,000 | | 14,000 | 52,000 | | | | | | | | | | | | |

Resource costs to activities (ABC cost sheet | Blue | Black | Red | Purple | Total | | 50,000 | 40,000 | 9,000 | 1,000 | 100,000 | Direct material | 25,000 | 20,000 | 4,680 | 550 | 50,230 | Direct labour | 10,000 | 8,000 | 1,800 | 200 | 20,000 | 40% of fringe benefits | 4,000 | 3,200 | 720 | 80 | 8,000 | Overheads | | | | | | Machine support | 7,000 | 5,600 | 1,260 | 140 | 1,4000 | Production run expenses | 7,333 | 7,333 | 5,573 | 1,760 | 22,000 | Set up expenses | 4,259 | 1,065 | 4,855 | 1,022 | 11,200 | Administrative expenses | 1,200 | 1,200 | 1,200 | 1,200 | 4,800 | Total overheads | 19,792 | 15,198 | 12,888 | 4,122 | 52,000 | Total cost | 58,792 | 46,398 | 20,088 | 4,952 | 130,230 | Cost per unit | 1.18 | 1.16 | 2.23 | 4.95 | | Sales | 75,000 | 60,000 | 13,950 | 1,650 |...

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