1.

First Stage of Allocation of cost to the activity cost pools:

Particular Activity Cost Pools

Assembling Processing Supporting Other Total
Units Cost Customers

Manufacturing overhead 250,000 175,000 25,000 50,000 500,000

Selling and Administrative

Overhead 30,000 135,000 75,000 60,000 300,000

TOTAL COST 280,000 310,000 100,000 110,000 800,000

2. Activity Rates for the Activity Cost Pools:

Activity Cost Pools

Assembling Processing Supporting
Units Cost Customers

Total cost incurred in Activity Pool 280,000 310,000 100,000

Measurement of Activity Nos. of units Nos. of orders Nos. of customers

Total activity in activity cost pool 1,000 units 250 orders 100 customers

ACTIVITY RATE 280 1,240 1,000

3. Total cost incured on Office Mart's Order:

Activity Cost Pool Activity Rate Nos. of activity ABC Cost
Assembling Unit 280 per unit 80 cabnits 22,400

Processing Cost 1,240 per order 4 orders 4,960

Supporting custmer 1,000 per customer 01 Custmer 1,000

28,360

Product Margin on 80 filling cabnits:

Sales (80 units x Rs. 595) 47,600

Cost incurred:
a) Direct Material (80 units x Rs. 180) 14,400
b) Direct Labor (80 units x Rs. 50) 4,000
c) Volume related overhead 22,400
d) Order related overhead 4,960 (45,760)
PRODUCT MARGIN 1,840
Customer Margin:
Product Margin 1,840
Less: Customer support overhead (1,000)
CUSTOMER MARGIN 840
Req no.1: Activity rate for the activity cost pools are:

Particular Activity Cost Pools

Assembling Processing Supporting Other Total
Units Cost Customers

Manufacturing overhead 250,000 175,000 25,000 50,000 500,000

Selling and Administrative

Overhead 30,000 135,000 75,000 60,000 300,000

TOTAL COST 280,000 310,000 100,000 110,000 800,000

Activity rate: Assembling Processing Supporting

Units Cost Customers

Total Activity 1,000 units 250 orders 100 customers

Allocated rate
Manufacturing overhead 250 700 250

Selling and Administrative

Overhead 30 540 750
TOTAL RATE 280 1,240 1,000

Required no.2:
Overhead cost for the four orders of total of 80 filling cabinets of Office Mart:
PRODUCT MARGIN Customer Margin
Assembling Processing Supporting
Units Cost Customers

Total Activity during Office mart order 80 units 4 orders 1 customer

Manufacturing overhead cost 20,000 2,800 250

Selling and Admin. Overhead cost 2,400 2,160 750

22,400 4,960 1,000
Required no. 3: ACTION ANALYSIS:

PRODUCT MARGIN
Sales (80 cabinets x Rs. 595) 47,600

Less: Green color cost

Direct Material (80 cabinets x Rs. 180) 14,400 (14,400)
GREEN MARGIN 33,200

Less: Yellow color cost:

Direct labor (80 cabinets xRs. 50) 4,000
Manufacturing overhead
Assembling dept cost 20,000
Processing cost 2,800 22,800 (26,800)
YELLOW MARGIN 6,400
Less: Red color cost:
Selling and administrative overhead
Assembling dept cost 2,400
Processing cost 2,160 (4,560)
RED MARGIN 1,840

CUSTOMER MARGIN
Sales (80 cabinets x Rs. 595) 47,600

Less: Green color cost

Direct Material (80 cabinets x Rs. 180) 14,400 (14,400)
GREEN MARGIN 33,200
Less: Yellow color cost:
Direct labor (80 cabinets xRs. 50) 4,000
Manufacturing overhead
Assembling dept cost 20,000
Processing cost 2,800
Supporting customer 250 23,050 (27,050)
YELLOW MARGIN 6,150
Less: Red color cost:
Selling and administrative overhead
Assembling dept cost 2,400
Processing cost 2,160
Supporting customer 750 (5,310)
RED MARGIN 840
 Solution of Pb 8-6 of 10th edition.

Activity Pools Activity rate Activity done Total Cost

Order size 17.60 per direc 150 hours 2,640

Customer order 360 per custom01 customer or 360

Product Testing 79 per testing 18 testing hours 1,422

Selling 1,494 per sales 3 sales calls 4,482

Total cost incured on Hard Rock 8,904

Solution of Pb 8-7 of 10th edition

Particulars Activity Pools Total

Order Size Customer Product Selling
Order Testing

Total activity done 150 hours 01 customer 18 testing 3 sales

for the order order hours calls
150 1 18 3
Manufacturing:
Indirect labor 1,440 231 648 - 2,319
Factory Depreciation 1,050 - 324 - 1,374
Factory Utilities 30 - 18 - 48
Factory Administration - 46 432 36 514

General Selling and

Administrative:
Wages and Salaries 120 72 - 2,895 3,087
Depreciation - 11 - 108 119
Taxes and Insurance - - - 147 147
Selling expenses - - - 1,296 1,296
2,640 360 1,422 4,482 8,904
 Prob 8-8

Total Cost assigned to order:

Activity Cost Pools Activity Rate Nos. of Activity ABC Cost

Volume 12 per direct l 1,920 direct labor hou 23,040

Batch Processing 96 per batch 4 batches 384

Order Processing 284 per order 01 order 284

Customer Services 2620 per cust 01 customer 2,620

Total cost assigned 26,328
Total Direct Labor hours:

Nos. of units produced 2,400

Time allocated for one unit 0.80

Total Direct Labor hours 1,920

Required no. 1: Profitability of the order

PRODUCT MARGIN

Sales (2,400 units x Rs. 137.95) 331,080

Less: Cost:

Direct Material (2,400 units x Rs. 112) 268,800

Direct Labor (2,400 units x Rs. 14.4) 34,560
Volume 23,040
Batch processing 384
Order Processing 284
TOTAL COST (327,068)
PRODUCT MARGIN 4,012
CUSTOMER MARGIN

Product Margin 4,012

Less: Customer services cost (2,620)
CUSTOMER MARGIN 1,392
ex-8-9

Particulars Volume Batch Order Customer Total

Processing Processing Services

Activity 1920 D/L hours 4 Batchers 01 order 01 customer

1,920 4 1 1

Production Overhead:

Indirect Labor 3,456 288 18 - 3,762

Factory equipment depreciation 14,112 13 - - 14,125
Factory administration 4,032 28 28 268 4,356

General Selling & Admin. Overhead:

Wages & Salaries 960 52 153 1,864 3,029

Depreciation 3 6 26 35
Marketing Expenses 480 - 79 462 1,021
Total Cost 23,040 384 284 2,620 26,328

ACTION ANALYSIS - CUSTOMER MARGIN

Sales (2,400 units x 137.95) 331,080.00
Less: Green Cost
Direct material (2,400 units x 112) (268,800.00)

GREEN MARGIN 62,280.00

Less: Yellow cost

Direct Labor (2,400 units x 14.40) 34,560.00
Indirect Labor 3,762.00
Marketing Expenses 1,021.00 (39,343.00)

YELLOW MARGIN 22,937.00

Less: Red Cost

Factory equipment depreciation 14,125.00
Factory administration 4,356.00
Selling and admin wages & salaries 3,029.00
Selling and admin depreciation 35.00 (21,545.00)

RED MARGIN 1,392.00