Resources and Cost Pooling
1) Indirect Labour Cost 28,000 Cost Driver Annual
Activity
Scheduling 50% 14,000 Production Runs 150
Machine Set Up 40% 11,200 Set up Time 526
Maintaining Records 10% 2,800 Parts Administration 4
2) Fringe Benefits 8,000 Direct Labor 2,000
(40% of Direct Labour)
3) Computer System Components 10,000
Scheduling 80% 8,000 Production Runs 150
Maintaining 20% 2,000 Parts Administration 4
Record
4) Machinery 8,000
5)Maintenance 4,000
6) Energy 2,000
14,000 Machine Hr per unit 10,000
Activity Cost Drivers Rate -Total
Activity Activity Activity Cost Cost Driver Activity Cost
Cost Driver Quantity Driver Rate
Production 22,000 Production Runs 150 146.67
Run
Set up 11,200 Total Set Up Time 526 21.2928
Parts 4,800 Parts 4 1200
Administration Administration
Support 14,000 Machine Hours 10,000 1.4
Direct Labour 8,000 Direct Labour 2,000 4
Fringe Hours
Activity Cost per Unit
Activity Blue Black Red Purple Total
Production 7,333.5 7,333.5 5,573 1,760 22,000
Run (146.67) (50) (50) (38) (12)
Set up 4,258 1,064.5 4,854.12 1,022 11,200
(21.29) (50x4=200 (50x1=50) (38x6=228) (12x4=48)
Set up Time)
Parts 1,200 1,200 1,200 1,200 4,800
Administration (1) (1) (1) (1)
(1,200)
Support 7,000 5,600 1,260 140 14,000
(1.4) (50000x0.1= (40000x0.1 (9000x0.1=900) (1000x0.1
5000 =4000) =100)
Machine
Hrs.)
Direct Labour 4,000 3,200 720 80 8,000
Fringe (50,000x (40,000x (9,000x (1000x
0.02 =1000 0.02=800)
(4) Labour Hrs.)
0.02=180) 0.02=20)
ABC Income Statement
Blue Black Red Purple Total
Sales $75,000 $60,000 $13,950 $1,650 $150,600
Material Costs 25,000 20,000 4,680 550 50,230
Diect Labour 10,000 8,000 1,800 200 20,000
Overheads
Production Run 7,333.33 7,333.33 5,573.33 1,760 22,000
Set up 4,258.55 1,064.63 4,854.70 1,022.05 11,200
Parts Administration 1,200 1200 1,200 1,200 4,800
Support 7,000 5,600 1,260 140 14,000
Direct Labour Fringe 4,000 3,200 720 80 8,000
Total Operating Cost 58,792 46,398 20,088 4,952 130,230
Total Operating 16,208 13,602 (6,138) (3,302) 20,370
Income
Return on Sales 21.6% 22.6% -44% -200% 13.5%
ABC Income Statement
Blue Black Red Purple
Sales $75,000 $60,000 $13,950 $1,650
Sales Volume 50,000 40,000 9,000 1,000
Total Operating 58,792 46,398 20,088 4,952
Cost
ABC Cost / $1.176 $1.16 $2.23 $4.95
unit
Selling Price / $1.50 $1.50 $1.55 $1.65
unit
Loss Loss
