Particulars Prod Runs Set up Administer Machine runs Total

Machines Parts
Indirect Labor 50% 40% 10% 28,000
& ½ of fringe
Computer 80% ----- 20% 10,000
Expense
Machine ------ ------ ------ 100% 8,000
Depreciation
Maintenance ------ ------- ------- 100% 4,000
Energy ------ ------- ------- 100% 2,000
Activity 22,000 11,200 4,800 14,000 52,000
Expense
Cost driver- 150 526 4 10,000
Quantity
Unit of Production Set up hours No. Of parts Machine
measurement runs Hours
Activity cost 146.66 21.29 1,200 1.40
driver rate
Particulars Blue Black Red Purple Total
Sales 75,000 60,000 13,950 1,650 1,50,600
Material Cost 25,000 20,000 4,680 550 50,230
Direct Labor 10,000 8,000 1,800 200 20,000
40% fringe on 4,000 3,200 720 80 8,000
direct labor
Machine time 7,000 5,600 1,260 140 14,000
expense
Prod Run exp. 7,333 7,333 5,573 1,760 22,000
Set up time 4,259 1,065 4,855 1,022 11,200
exp.
Administer 1,200 1,200 1,200 1,200 4,800
Parts Exp.
Total exp. 58,792 46,398 20,088 4,952 1,30,230
Operating 16,208 13,602 (6,138) (3,302) 20,370
Income
Return on 21.6% 22.7% (44%) (200%) 13.5%
sales
Traditional Costing
Overheads Akash (Rs) Brudhvi(Rs) Captain(Rs) Dolly (Rs.)
D. Material 42 45 40 48
D. Labor 10 09 07 08
Overhead 72 54 36 18
Cost of 124 108 83 74
prod. Per
unit
Output in 720 600 480 504
units
Total cost 89,280 64,800 39,840 37,296

Machine hours (720 x4 + 600x 3 + 480 x2 + 504 x1) = 6,144 Hrs

Rate per hour 110592 / 6144 = 18
Activity Based costing
Set up Store Receiving Inspection
Machine Operation and maintenance 28,000 21,000 14,000
cost of Rs. 63,000 to be distributed in the
ratio of 4:3:2

Cost Rs. Drivers No. Cost per

unit of
driver
Set up 48,000 Prod. Runs 96 500
Store Receiving 36,000 Requisitions 200 180
raised
Inspection 24,000 Prod runs 96 250
Material handling 2,592 Orders 192 13.50
and disp

Prod Runs for Akash (720 /24) = 30; Brudhvi ( 600/ 24) = 25
Captain (480 / 24) = 20 ; Dolly (504/24) = 21
Particulars Akash Brudhvi Captain Dolly
Direct Material 30,240 27,000 19,200 24,192
Direct Labor 7,200 5,400 3,360 4,032
Set Up 15,000 12,500 10,000 10,500
Store receiving 9,000 9,000 9,000 9,000
Inspection 7,500 6,250 5,000 5,250
Material handling 810 675 540 567
and dispatch
Total cost 69,750 60,825 47,100 53,541
Per unit cost 96.875 101.375 98.125 106.23

Particulars Akash Brudhvi Captain Dolly

Cost per 124 108 83 74
unit (a)
Cost per 96.88 101.38 98.13 106.23
unit (b)
Diff (27.12) (6.62) 15.13 32.23
Cost Rs Drivers No. Cost P.U of driver
F.OH appl. To mach. Oriented 37,424 Machine Hours 12,475 3
activity
Set up cost 4,355 No. of set ups 17 256. 18
Material ordering cost 1,920 No. of material order 10 192
Material handling cost 7,580 No. of times material 27 280.74
handled
Administration of spare parts 8,600 No. of spare parts 12 716.67

Overheads Aox Box Cox Dox

Machine O H 375 3,750 1800 31,500
Set up cost 256 1,537 512 2,050
Material ordering 192 768 192 768
Material Handling 562 2,807 842 3,369
Spare Part Cost 1,433 3,583 717 2,867
Total OH Cost 2,818 12,445 4,063 40,554
Total units 500 5,000 600 7,000
5.63 2.48 6.77 5.79