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    Abc Costing

    Uploaded by

    Sumeet Kanojia
    The document contains calculations of cost driver rates and allocation of overhead to products using traditional and activity-based costing methods. It compares the machine hour rate and product costs calculated traditionally to those calculated using cost driver rates for machine hours, set-ups and purchase orders based on actual consumption of each activity by each product. The analysis shows overcharging for some products and undercharging for others using the traditional approach.

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    © All Rights Reserved
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    Abc Costing

    Uploaded by

    Sumeet Kanojia
    82 views27 pages
    The document contains calculations of cost driver rates and allocation of overhead to products using traditional and activity-based costing methods. It compares the machine hour rate and product costs calculated traditionally to those calculated using cost driver rates for machine hours, set-ups and purchase orders based on actual consumption of each activity by each product. The analysis shows overcharging for some products and undercharging for others using the traditional approach.

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    ABC COSTING

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    The document contains calculations of cost driver rates and allocation of overhead to products using traditional and activity-based costing methods. It compares the machine hour rate and product costs calculated traditionally to those calculated using cost driver rates for machine hours, set-ups and purchase orders based on actual consumption of each activity by each product. The analysis shows overcharging for some products and undercharging for others using the traditional approach.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    82 views27 pages

    Abc Costing

    Uploaded by

    Sumeet Kanojia
    The document contains calculations of cost driver rates and allocation of overhead to products using traditional and activity-based costing methods. It compares the machine hour rate and product costs calculated traditionally to those calculated using cost driver rates for machine hours, set-ups and purchase orders based on actual consumption of each activity by each product. The analysis shows overcharging for some products and undercharging for others using the traditional approach.

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    You are on page 1of 27

    DEPT 1 400000 X1500 160 X1500 240000

    2500

    DEPT 2 100000 X300 250 X300 75000


    400

    DEPT 3 500000 X300 1000 X300 300000


    500
    TOTAL 615000
    PRODUCTS
    COST M S T TOTAL
    POWER 40000 80000 60000 180000
    QUALITY INSPECTION 105000 75000 90000 270000

    145000 155000 150000 450000

    WORKING NOTE

    1 COST DRIVER RATE OF POWER TOTAL O/H


    TOTAL KILOWATT HRS

    200000
    50000

    2 COST DRIVER RATE OF QUALITY TOTAL O/H


    TOTAL NO OF INSPECTIONS

    300000
    10000

    30
    PARTICULARS AMOUNT
    DIRECT MATERIAL 30000
    DIRECT LABOUR (3000X5) 15000
    GENERAL O/H (500X3) 1500
    SETUPS (4000X2) 8000
    SECURITY CHARGES 5000

    TOTAL COST OF GAME 59500


    PARTIULARS AMOUNT
    1 SETUPS 16200
    2 PURCHASE ORDER 1050
    3 PRODUCT TESTING 3400
    4 TEMPLATE ETCHING 1280
    5 FACILITIES 20000

    TOTAL O/H 41930

    WORKING NOTE

    COST DRIVER RATE = ESTIMATED O/H


    EXPECTED ACTIVITY
    1 SETUP 18000 360
    50
    2 PURCHASE ORDER 1050 2
    525
    3 PRODUCT TESTING 3500 10
    350
    4 TEMPLATE ETCHING 1120 40
    28
    5 FACILITIES 20000 2.5
    8000
    1 CALCULATION OF COST DRIVER RATE
    TOTAL O/H
    TOAL NO OF ACTIVITIES

    MATERIAL PROCUREMENT 1160000 527.27


    2200
    MATERIAL HANDLING COST 500000 367.65
    1360
    MAINTENANCE 1940000 115.48
    16800
    SET-UP 830000 798.08
    1040
    QUALITY CONTROL 352000 195.56
    1800
    MACHINERY 1440000 30
    48000

    2 CALCULATION OF COST OF BATCH OF COMPONENT

    PARTICULARS AMOUNT
    MATERIAL COST 260000
    LABOUR COST 490000
    MATERIAL OREDERS 27418.18
    MATERIAL MOVEMENTS 13235.29
    SET-UPS 39903.85
    MAINTENANCE HOURS 159357.1
    QUALITY CONTROL INSPECTION 10951.11
    MACHINE HOURS 108000

    TOTAL O/H 1108866

    2, 4, 5, 7, 11, 12, 13,15, 16, 17, 19, 20, 23, 28, 29, 30, 31, 33, 34, 37, 41, 43
    1 CALCULATIONS OF ACTIVITY RATES

    ACTIVITY COST DRIVER CAPACITY


    ATM SERVICES 100000 NO OF TRANSACTIONS 200000
    COMPUTER PROCESSING 1000000 NO OF TRANSACTIONS 2500000
    STATEMENTS 800000 NO OF STATEMENTS 500000
    CUSTOMER INQUIRY 360000 TELEPHONES MIN 600000

    2 CALCULATIONS OF COST OF EACH PRODUCTS

    ACTIVITY SAVINGS A/C PERSONAL LOANS CREDIT CARDS


    ATM SERVICES 90000 - 10000
    COMPUTER PROCESSING 800000 80000 120000
    STATEMENTS 480000 80000 240000
    CUSTOMER INQUIRY 210000 54000 96000

    TOTAL COST 1580000 214000 466000


    TOTAL UNITS 30000 5000 10000
    CPU 52.67 42.8 46.6
    RATE
    0.5
    0.4
    1.6
    0.6
    A) TRADITIONAL COSTING
    1
    TOTAL PRODUCTION O/H 2600000
    TOTAL UNITS PRODUCED 60000
    CPU 43.33 2

    PRODUCTS UNITS CPU TOTAL COST


    A 10000 43.33 433300
    B 20000 43.33 866600
    C 30000 43.33 1299900

    2599800

    B) ABC ANALYSIS

    ACTIVITY COST DRIVER RATE TOTAL A B


    STORES RECEIVING PURCHASE REQ 236.8 296000 71040 106560
    INSPECTION NO OF PROD RUN 298 894000 223500 312900
    DESPACTH ORDERS EXECUTED 210000 50400 75600
    MACHINE SETUPS NO OF SETUPS 1200000 360000 390000

    AS PER ABC 2600000 704940 885060

    C) COMPARISION
    A B
    O/H AS PER ABC 704940 885060
    OH/ AS PER TRADITIONAL 433300 866600

    (OVER) / UNDER ABSORPTION 271640 18460


    WORKING
    STORES REC 296000 236.8
    1250

    INSPECTION 894000 298


    3000

    C
    118400
    357600
    84000
    450000

    1010000

    C
    1010000
    1299900

    -289900
    A) O/H ALLOCATED TO DEP B AS PER TRADITIONAL METHOD

    TOTAL O/H 76500


    TOTAL HOURS 4500

    17 PER HR

    DEP B 900 HRS 15300

    B) O/H ALLOCATED TO DEP B AS PER ABC

    PARTICULARS DRIVER RATES NO OF ACTIVITIES TOTAL COST


    SETUPS 66 24 1584
    QUALITY CONTROL 60 60 3600
    FABRICATION 10 900 9000

    14184
    1) DIRECT LABOUR HOUR RATE

    TOTAL O/H 50000


    TOTAL LAB HR LENSES 5000
    TOTAL LAB HR MIRRO 5000
    TOTAL HRS 10000

    LAB O/H RATE 5

    PRODCUTS HRS O/H


    LENSES 200 1000
    MIRROR 200 1000
    1 TRADITIONAL METHOD

    MACHINE HOUR RATE = TOTAL O/H


    TOTAL MACHINE HOURS

    1988000
    140000

    STATEMENT SHOWING COST PER UNIT

    PARTICULARS A
    OUTPUT (UNITS) 50000
    MACHINE HOURS 20000
    O/H COST @ Rs. 14.2 284000
    O/H CPU 5.68

    2 ABC METHOD

    CALCULATION OF COST DRIVER RATES

    1 MACHINE HOUR RATE TOTAL VOLUME RELATED O/H


    TOTAL MACHINE HOURS

    2 SETUP RATE TOTAL SETUP RELATED O/H


    TOTAL NO OF SETUPS

    3 PURCHASE ORDER RATE TOTAL PURCHASE ORDER O/H


    TOTAL NO OF PURCHASE ORDER

    STATEMENT SHOWING CPU

    PARTICULARS
    VOLUME RELATED COST
    SETUP RELATED COST
    PURCHAE RELATED COST
    TOTAL O/H
    TOAL NO OF UNITS
    CPU
    ACHINE HOURS

    14.2

    B
    60000
    120000
    1704000
    28.4

    OLUME RELATED O/H 550000 3.93


    ACHINE HOURS 140000

    TUP RELATED O/H 820000 12812.5


    O OF SETUPS 64

    RCHASE ORDER O/H 618000 1136.03


    O OF PURCHASE ORDER 544

    A B
    78571.43 471428.6
    256250 563750
    181764.7 436235.3
    516586.1 1471414
    50000 60000
    10.33 24.52
    C COMMENTS

    PARTICULARS A B C D
    CPU AS PER TRADITIONAL 124 108 83 74
    CPU AS PER ABC 96.88 101.38 98.13 106.23

    DIFFERENCE 27.12 6.62 -15.13 -32.23

    IT IS OBSERVED THTAT THERE HAS BEEN OVER CHARGING IN PRODUCT A &B AND
    UNDER CHARGING IN PRODUCTS C&D
    A TRADITIONAL METHOD

    MACHINE HOUR RATE= TOTAL O/H 110592


    TOTAL MACHINE HOURS 6144

    TOTAL MACHINE HOURS= (720X4 + 600X3 + 480X2 + 504X1)

    STATEMENT SHOWING TOTAL COST

    PARTICULARS A B C D
    DM 42 45 40 48
    DL 10 9 7 8
    O/H 72 54 36 18
    CPU 124 108 83 74
    TOTAL UNITS 720 600 480 504
    TOTAL COST 89280 64800 39840 37296

    B ACTIVITY BASED COSTING


    SETUP RECEIVINGINSPECTION
    MACHINE OPERATION(4:3:2) 28000 21000 14000

    PARTICULARS AMOUNT DRIVERS NO COST PER DRIVER


    SET UP 48000 NO OF PROD RUNS 96 500
    STORE RECEIVING 36000 REQISITION RAISED 200 180
    INSPECTION 24000 NO OF PROD RUNS 96 250
    MATERIAL HANDELIN 2592 ORDERS EXECUTED 192 13.5

    PRODUCTION RUN
    A 30 C 20
    B 25 D 21

    STATEMENT SHOWING TOTAL COST

    PARTICULARS A B C D
    DM 30240 27000 19200 24192
    DL 7200 5400 3360 4032
    SETUP 15000 12500 10000 10500
    STORE RECEIVING 9000 9000 9000 9000
    INSPECTION 7500 6250 5000 5250
    MATERIAL HANDELIN 810 675 540 567
    TOTAL COST 69750 60825 47100 53541
    TOTAL UNIT 720 600 480 504
    CPU 96.88 101.38 98.13 106.23

    NO OF ORDERS EXECUTED
    A 60 C 40
    B 50 D 42
    18 PER HOUR

    6144 HOURS

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