Pricing: The meteor model retails for 840€, and Moonlight Model retails for 1485€ The company incurs overheads which total €1200.000. Α total of 15000€ direct labor hours are worked. Department cost center Buliding rent 50.000 utilities 50.000 machining 600.000 Procurement 150.000 Sales 150.000 General Management 200.000 Total 1.200.000 Cost center Machining Finishing Administration Floor Area 1.500 sq.m 1.500 sq.m 2.000 sq.m Machine Hours 25.000 hours 5.000 hours Direct Labour Hours 5000 hours 10.000 hours Each unit of Meteor was machined for 10 hours in Machining and 1 hour in Finishing. Each unit of the Moonlight was machined for 2 hours in Machining and 1 hour in Finishing. ABC Activity Activity cost € Activity cost driver Total quantity of driver Quantity of driver used for Meteor Quantity of driver used for Moonlight Machining 600.000 Machine set up 60 10 30 Procurement 150.000 Purchase orders 75 10 20 Sales 150.000 sales orders 500 250 50 Total 900.000 She suggests that the remaining 300.000 of overheads are allocated on a machine hours basis. Overall, 30.000 machine hours are operated. of these 16500 hours relate to Meteor and 1500 hours relate to Moonlight Calculate the full cost for each bicycle model (e.g. Meteor and Moonlight) based on: a. Plant-wide (single or blanket) overhead rates b. Department cost center rates (where overhead absorption rates are based on an overhead analysis sheet) c. Activity-based costing (ABC) d. Calculate the profit from each model based on the three different costing methods and comment on the results.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Pricing: The meteor model retails for 840€, and Moonlight Model retails for 1485€
The company incurs
Department cost center
|
Buliding rent |
50.000 |
| utilities | 50.000 |
| machining | 600.000 |
| Procurement | 150.000 |
| Sales | 150.000 |
| General Management | 200.000 |
| Total | 1.200.000 |
| Cost center | Machining | Finishing | Administration |
| Floor Area | 1.500 sq.m | 1.500 sq.m | 2.000 sq.m |
| Machine Hours | 25.000 hours | 5.000 hours | |
| Direct Labour Hours | 5000 hours | 10.000 hours |
Each unit of Meteor was machined for 10 hours in Machining and 1 hour in Finishing. Each unit of the Moonlight was machined for 2 hours in Machining and 1 hour in Finishing.
ABC
| Activity | Activity cost € | Activity cost driver | Total quantity of driver | Quantity of driver used for Meteor | Quantity of driver used for Moonlight |
| Machining | 600.000 | Machine set up | 60 | 10 | 30 |
| Procurement | 150.000 | Purchase orders | 75 | 10 | 20 |
| Sales | 150.000 | sales orders | 500 | 250 | 50 |
| Total | 900.000 |
She suggests that the remaining 300.000 of overheads are allocated on a machine hours basis. Overall, 30.000 machine hours are operated. of these 16500 hours relate to Meteor and 1500 hours relate to Moonlight
Calculate the full cost for each bicycle model (e.g. Meteor and Moonlight) based on:
a. Plant-wide (single or blanket) overhead rates
b. Department cost center rates (where overhead absorption rates are based on an overhead analysis sheet)
c. Activity-based costing (ABC)
d. Calculate the profit from each model based on the three different costing methods and comment on the results.
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