Tugas Cost Management Kelompok 4

Problem 5-54 (Volume-based costing versus ABC)
West Chemical Company produces three products. The operating results of 2010 are:
Product Sales Quantity Target Price Actual Price Differences
A 1,000 $ 279.00 $ 280.00 $ 1.00
B 5,000 $ 294.00 $ 250.00 $ (44.00)
C 500 $ 199.50 $ 300.00 $ 100.50
- the firm sets the target price at each product at 150% of the product's total manufacturing cost
- the firm was able to sell Product C at a much higher price than the target price of the product and lost money on Product B
- CEO wants to promote Product C much more aggressively and phase out Product B
- both the budgeted and actual factory overheads for 2010 are $493,000.00
- the actual units sold for each product also are the same as budgeted units
The direct materials and direct labor costs per unit for each product are:
Product A Product B Product C
Direct Materials $ 50.00 $ 114.40 $ 65.00
Direct Labor $ 20.00 $ 12.00 $ 10.00
Total Prime Cost $ 70.00 $ 126.40 $ 75.00
Usage if the factory overhead during 2010:

Product A Product B Product C Total Overhead
Number of setups 2 5 3 $ 8,000.00
Weight of DM (pounds) 400 250 350 $ 100,000.00
Waste & hazardous disposals 25 45 30 $ 250,000.00
Quality inspections 30 35 35 $ 75,000.00
Utilities (machine hours) 2000 7000 1000 $ 60,000.00
$ 493,000.00
Required:
1 Determine the manufacturing cost per unit for each of the products using the volume-based method
Total Overhead $ 493,000.00
Overhead rate = = =
(DL A x SQ A) + (DL B x SQ B) + (DL C x SQ C) 85,000

Materials $ 50.00 $ 114.40 $ 65.00
Labor $ 20.00 $ 12.00 $ 10.00
Overhead* $ 116.00 $ 69.60 $ 58.00 *Labor x overhead rate
Total Cost $ 186.00 $ 196.00 $ 133.00
2 What is the least profitable and the most profitable product under both the current and the ABC costing systems?
Current costing systems:
Actual selling price $ 280.00 $ 250.00 $ 300.00
Product manuf. cost $ 186.00 $ 196.00 $ 133.00
Gross margin $ 94.00 $ 54.00 $ 167.00
Gross margin ratio* 33.57% 21.60% 55.67% *Gross margin/actual selling price
According to the current costing systems, Product B is the least profitable product and Product C is the most profitable p
ABC costing systems:
DM $ 50.00 $ 114.40 $ 65.00
DL $ 20.00 $ 12.00 $ 10.00 Sales Quantity
Factory overhead
Setups (a) $ 1.60 $ 0.80 $ 4.80 (a) Setups
Material handling (b) $ 40.00 $ 5.00 $ 70.00 (b) Material Handling
Hazardous disposals (c) $ 62.50 $ 22.50 $ 150.00 (c) Hazardous disposals
Quality inspections (d) $ 22.50 $ 5.25 $ 52.50 (d) Quality inspections
Utilities (e) $ 12.00 $ 8.40 $ 12.00 (e) Utilities
Total FOH $ 138.60 $ 41.95 $ 289.30
Total Cost $ 208.60 $ 168.35 $ 364.30

Product manuf. cost $ 208.60 $ 168.35 $ 364.30
Gross margin $ 71.40 $ 81.65 $ (64.30)
Gross margin ratio* 25.50% 32.66% -21.43% *Gross margin/actual selling price
According to ABC costing systems, Product B is the least profitable product and Product C is the most profitable product
3 What is the new target price for each product based on 150% of the new cost under the ABC system?
Compare the price with the actual selling price
Product costs:
Direct Labor based syste $ 186.00 $ 196.00 $ 133.00
Activity based system $ 208.60 $ 168.35 $ 364.30
ABC based product costs
Target price (150%) $ 312.90 $ 252.53 $ 546.45 =150% x activity based system
Difference in price $ 32.90 $ 2.52 $ 246.45
Direct Labor based costing system

Gross margin $ 94.00 $ 54.00 $ 167.00
Gross margin ratio 33.57% 21.60% 55.67%
Activity based costing system
Gross margin $ 71.40 $ 81.65 $ (64.30)
Gross margin ratio 25.50% 32.66% -21.43%
4 Comment on the result from a competitive and strategic perspective. As a manager of West Chemical, describe what actio
provided by the activity based unit costs
a. menurunkan/mengurangi jumlah produksi Product C karena berdasarkan activity based costing perusahaan mengalami
sebesar $64,30 untuk setiap biaya produksi $364,30 atas Product C;
b. terhadap Product A dan B, dengan menggunakan target price (yang telah dimark-up 150%), maka product A memiliki pe
untuk mengurangi perbedaan harga tersebut, maka perusahaan perlu melakukan peninjauan ulang terhadap manufactu
sementara Product B tidak memiliki perbedaan yang signifikan ($2.52)
Kelompok 4:
- Eklin Anita Sari Purba
- Rifdah Aisyah
- Samudro Bekti
- Syela Ernawati
d lost money on Product B
Cost/actv
$ 800.00
$ 100.00
$ 2,500.00
$ 750.00
$ 6.00
$ 5.80
BC costing systems?
uct C is the most profitable product

1,000 5,000 500
A A per unit B B per unit C C per unit
$ 1,600.00 $ 1.60 $ 4,000.00 $ 0.80 $ 2,400.00 $ 4.80
$ 40,000.00 $ 40.00 $ 25,000.00 $ 5.00 $ 35,000.00 $ 70.00
$ 62,500.00 $ 62.50 $ 112,500.00 $ 22.50 $ 75,000.00 $ 150.00
$ 22,500.00 $ 22.50 $ 26,250.00 $ 5.25 $ 26,250.00 $ 52.50
$ 12,000.00 $ 12.00 $ 42,000.00 $ 8.40 $ 6,000.00 $ 12.00
the most profitable product
hemical, describe what actions you would take based on the information
ting perusahaan mengalami kerugian
maka product A memiliki perbedaan harga yang cukup signifikan ($32.90),

an ulang terhadap manufacturing cost Product A

Tugas Cost Management Kelompok 4

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Tugas Cost Management Kelompok 4

Uploaded by

Copyright:

Available Formats

Problem 5-54 (Volume-based costing versus ABC)

Usage if the factory overhead during 2010:

Product A Product B Product C

Actual selling price $ 280.00 $ 250.00 $ 300.00

Direct Labor based costing system

d lost money on Product B

uct C is the most profitable product

the most profitable product

ting perusahaan mengalami kerugian

maka product A memiliki perbedaan harga yang cukup signifikan ($32.90),

You might also like