FIRST STAGE ALLOCATION

Description Job Preparation Scanning Assembly Output

Wages $ 8,000 $ 32,000 $ 64,000 $ 10,000
Depreciation $ 500 $ 25,000 $ 10,000 $ 14,000
Rent $ 2,000 $ 2,000 $ 8,000 $ 4,000
Other $ 1,311 $ 5,246 $ 10,492 $ 1,639
Total Overhead $ 11,811 $ 64,246 $ 92,492 $ 29,639
Total No of Hours 160 640 1280 200
Labour Cost per hour $ 74 $ 100 $ 72 $ 148
Floor space(sq ft) 1000 1000 4000 2000
Cost of labor far exceeds depreciation, so labor hours will be a more important cost driver of overhead in t

SECOND STAGE ALLOCA

Job Revenue Total Material Exp Gross Margin Job Preparation
61001 $ 9,600 $ 5,400 $ 4,200 $ 295
61002 $ 9,600 $ 3,500 $ 6,100 $ 221
61003 $ 23,000 $ 4,500 $ 18,500 $ 517
61101 $ 12,000 $ 1,800 $ 10,200 $ 295
61102 $ 11,000 $ 1,500 $ 9,500 $ 295
61201 $ 11,000 $ 1,500 $ 9,500 $ 295
61202 $ 23,000 $ 3,300 $ 19,700 $ 517
61203 $ 22,000 $ 3,400 $ 18,600 $ 443
61204 $ 20,000 $ 3,200 $ 16,800 $ 443
61301 $ 50,000 $ 13,000 $ 37,000 $ 1,107
61401 $ 7,800 $ 1,800 $ 6,000 $ 369
61402 $ 8,000 $ 3,100 $ 4,900 $ 295
61403 $ 8,000 $ 3,900 $ 4,100 $ 295
61404 $ 9,000 $ 2,100 $ 6,900 $ 295
61405 $ 9,800 $ 2,000 $ 7,800 $ 295
61501 $ 11,000 $ 2,200 $ 8,800 $ 295
61502 $ 11,000 $ 3,600 $ 7,400 $ 295
61601 $ 20,000 $ 3,300 $ 16,700 $ 517
61602 $ 2,000 $ 600 $ 1,400 $ 148
61603 $ 1,400 $ 1,000 $ 400 $ 148
61701 $ 8,000 $ 2,100 $ 5,900 $ 295
61702 $ 10,000 $ 2,500 $ 7,500 $ 295
61801 $ 4,000 $ 1,600 $ 2,400 $ 74
61901 $ 2,000 $ 1,700 $ 300 $ 148
61902 $ 12,000 $ 2,200 $ 9,800 $ 369
62001 $ - $ 200 $ -200 $ 74
$ 315,200 $ 75,000 $ 240,200 $ 3,174
Idle Time Cost $ 3,174.33
Unused Floor Space
Net Profit
N
Quality Control Idle Total
$ 11,000 $ 125,000
$ 500 $ 50,000
$ 1,000 $ 13,000 $ 30,000
$ 1,311 $ 20,000 $ 20,000
$ 13,811 $ 33,000 $ 225,000
160
$ 86
500 6500 $ 15,000
ant cost driver of overhead in this case

ECOND STAGE ALLOCATION

Scanning Assembly Output Quality Control Net Profit No of Pages
$ 3,212 $ 3,035 $ 1,186 $ 604 $ -4,132 16
$ 2,409 $ 2,746 $ 1,186 $ 691 $ -1,153 16
$ 4,015 $ 5,419 $ 2,371 $ 691 $ 5,487 32
$ 1,606 $ 2,168 $ 593 $ 345 $ 5,193 16
$ 1,606 $ 2,023 $ 593 $ 345 $ 4,637 16
$ 1,606 $ 2,312 $ 593 $ 518 $ 4,176 16
$ 3,212 $ 4,191 $ 1,186 $ 432 $ 10,163 32
$ 3,413 $ 4,625 $ 1,186 $ 518 $ 8,416 32
$ 3,012 $ 4,191 $ 1,186 $ 691 $ 7,278 32
$ 13,050 $ 18,065 $ 4,742 $ 2,590 $ -2,554 128
$ 1,405 $ 2,312 $ 593 $ 345 $ 975 16
$ 1,907 $ 2,312 $ 1,186 $ 604 $ -1,405 16
$ 2,008 $ 2,457 $ 593 $ 259 $ -1,512 16
$ 2,208 $ 2,601 $ 593 $ 432 $ 771 16
$ 2,008 $ 2,601 $ 593 $ 345 $ 1,958 16
$ 2,108 $ 2,818 $ 593 $ 345 $ 2,640 16
$ 2,008 $ 2,890 $ 1,186 $ 604 $ 417 16
$ 2,610 $ 4,336 $ 1,186 $ 777 $ 7,275 32
$ 502 $ 723 $ 148 $ 86 $ -207 4
$ 502 $ 795 $ 296 $ 86 $ -1,427 4
$ 2,008 $ 2,818 $ 593 $ 259 $ -73 16
$ 2,008 $ 2,963 $ 593 $ 432 $ 1,210 16
$ 502 $ 795 $ 296 $ 86 $ 647 4
$ 502 $ 867 $ 148 $ 86 $ -1,451 4
$ 1,907 $ 3,035 $ 593 $ 432 $ 3,464 16
$ 100 $ 145 $ 148 $ 86 $ -753 1
$ 61,435 $ 83,243 $ 24,156 $ 12,689 $ 50,040 $ 545
$ 2,810.76 $ 9,249.18 $ 5,483.28 $ 1,122.18 $ 21,839.73
$ 13,000
$ 15,200
 Profitability per page
$ -258.27
$ -72.04
$ 171.46
$ 324.54
$ 289.83
$ 260.97
$ 317.59
$ 263.00
$ 227.45
$ -19.95
$ 60.95
$ -87.79
$ -94.47
$ 48.16
$ 122.35
$ 165.03
$ 26.05
$ 227.35
$ -51.67
$ -356.78
$ -4.55
$ 75.63
$ 161.67
$ -362.80
$ 216.52
$ -753.24
$ 896.97
 Job Customer Numebers Job Preparation Scanning Assembly Output
61001 10 4 32 42 8
61002 10 3 24 38 8
61003 10 7 40 75 16
61101 11 4 16 30 4
61102 11 4 16 28 4
61201 12 4 16 32 4
61202 12 7 32 58 8
61203 12 6 34 64 8
61204 12 6 30 58 8
61301 13 15 130 250 32
61401 14 5 14 32 4
61402 14 4 19 32 8
61403 14 4 20 34 4
61404 14 4 22 36 4
61405 14 4 20 36 4
61501 15 4 21 39 4
61502 15 4 20 40 8
61601 16 7 26 60 8
61602 16 2 5 10 1
61603 16 2 5 11 2
61701 17 4 20 39 4
61702 17 4 20 41 4
61801 18 1 5 11 2
61901 19 2 5 12 1
61902 19 5 19 42 4
62001 20 1 1 2 1
Idle tme 43 28 128 37
160 640 1280 200

Job Job Preparation Scanning Assembly Output Quality Control

61001 0 16 10 4 2
61002 0 8 6 4 3
61301 2 5 10 2 2
61502 1 4 8 1 0
61801 0 1 3 1 0
61901 1 1 4 0 0
4 35 41 12 7

Job Job Preparation Scanning Assembly Output Quality Control

61301 1 3 4 1 1
61402 0 9 16 2 2
61403 0 10 14 2 1
61603 1 3 3 1 0
2 25 37 6 4
Quality Control Total
7 93
8 81
8 146
4 58
4 56
6 62
5 110
6 118
8 110
30 457
4 59
7 70
3 65
5 71
4 68
4 72
7 79
9 110
1 19
1 21
3 70
5 74
1 20
1 21
5 75
1 6
13 249
160 2440

Total
32
21
21
14
5
6
99

Total
10
29
27
8
74
 Rework cost due to customer specifications
Job Material Expense Job Preparation Scanning Assembly Output Quality Control
61001 $ 2,700.00 $ - $ 1,606.15 $ 722.59 $ 592.79 $ 172.64
61002 $ 1,100.00 $ - $ 803.07 $ 433.56 $ 592.79 $ 258.97
61301 $ 1,000.00 $ 147.64 $ 501.92 $ 722.59 $ 296.39 $ 172.64
61502 $ 1,500.00 $ 73.82 $ 401.54 $ 578.07 $ 148.20 $ -
61801 $ 1,000.00 $ - $ 100.38 $ 216.78 $ 148.20 $ -
61901 $ 1,000.00 $ 73.82 $ 100.38 $ 289.04 $ - $ -
$ 295.29 $ 3,513.45 $ 2,962.63 $ 1,778.36 $ 604.25

Rework cost due to inhouse errors

Job Material Expense Job Preparation Scanning Assembly Output Quality Control
61301 $ 1,000.00 $ 73.82 $ 301.15 $ 289.04 $ 148.20 $ 86.32
61402 $ 1,000.00 $ - $ 903.46 $ 1,156.15 $ 296.39 $ 172.64
61403 $ 1,000.00 $ - $ 1,003.84 $ 1,011.63 $ 296.39 $ 86.32
61603 $ 500.00 $ 73.82 $ 301.15 $ 216.78 $ 148.20 $ -
$ 147.64 $ 2,509.61 $ 2,673.59 $ 889.18 $ 345.29
 Total
$ 5,794.17
$ 3,188.38
$ 2,841.19
$ 2,701.63
$ 1,465.36
$ 1,463.24
$ 17,453.98

m
Total
$ 1,898.53
$ 3,528.64
$ 3,398.19
$ 1,239.95
$ 10,065.31
Customer Job ID Net Profit Cummulative Net Profit Revenues Average Profit
61202 $ 10,163 $ 10,163 $ 23,000 1109
61203 $ 8,416 $ 18,579 $ 22,000 1061
61204 $ 7,278 $ 25,857 $ 20,000 964
$70,000
61601 $ 7,275 $ 33,132 $ 20,000 964
61003 $ 5,487 $ 38,619 $ 23,000 1109
$60,000
61101 $ 5,193 $ 43,812 $ 12,000 579
61102 $ 4,637 $ 48,449 $ 11,000 530 $50,000
61201 $ 4,176 $ 52,624 $ 11,000 530
61902 $ 3,464 $ 56,089 $ 12,000 579 $40,000
61501 $ 2,640 $ 58,729 $ 11,000 530
61405 $ 1,958 $ 60,687 $ 9,800 473 $30,000
61702 $ 1,210 $ 61,897 $ 10,000 482
$20,000
61401 $ 975 $ 62,872 $ 7,800 376
61404 $ 771 $ 63,643 $ 9,000 434
$10,000
61801 $ 647 $ 64,289 $ 4,000 193
61502 $ 417 $ 64,706 $ 11,000 530 $-
61701 $ -73 $ 64,633 $ 8,000 386 1 2 3 4 5 6

61602 $ -207 $ 64,427 $ 2,000 96 Cum

62001 $ -753 $ 63,673 $ - 0
61002 $ -1,153 $ 62,521 $ 9,600 463
61402 $ -1,405 $ 61,116 $ 8,000 386
61603 $ -1,427 $ 59,689 $ 1,400 68
61901 $ -1,451 $ 58,238 $ 2,000 96
61403 $ -1,512 $ 56,726 $ 8,000 386
61301 $ -2,554 $ 54,172 $ 50,000 2411
61001 $ -4,132 $ 50,040 $ 9,600 463
$ 315,200 15200
 Cummulative Net average Profit
1109
2170 Chart Title
3135
$70,000
4099
5208
$60,000
5787
$50,000 6317
6848
$40,000 7426
7957
$30,000 8429
8912
$20,000
9288
9722
$10,000
9915
$- 10445
1 2 3 4 10831
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

10927
Cummulative Net Profit Cummulative Net average Profit
10927
11390
11776
11844
11940
12326
14737
15200
What should Colorscope do about the cost/quality tradeoff?
 · Price customer initiated rework
· Restructure production sequence:
prep -> scanning -> QC -> assembly -> output -> QC
· Short term: cost can be bear by the company
· Long term: customer initiated rework should be charged
· In house errors should be reduced
· Identify error at the scanning stage itself so it can be checked earlier
· Share rework cost with the customer