Case Artic Ins

Data Given

Direct Labor
Direct Overhead
Indirect Labor
Repair Labor
Repair Materials
Supplies
Power
Other
Total
Allocated Divisional Overhead
Total
Formed Bales Processed
Purchased Bales Processes
Total

Calculations

Formed Bales

Given
Calculated

Purchased

Given
Calculated

1979

Formed Bales Processed

Total Number
1,075,000.00

Purchased Bales Processed

Total

Arctic Insulation Summary 1

Formed Bales
Direct Labor
Depot Over Head
Division Overhead
Total
Increase 1980 vs 1979
Purchsed Bales
Direct Labor
Depot Over Head
Division Overhead
Total
Increase 1980 vs 1979

Arctic Insulation Summary 2

Formed Bales
Direct Labor
Depot Over Head
Division Overhead
Total
Increase 1980 vs 1979

280,000.00

Purchsed Bales
Direct Labor
Depot Over Head
Division Overhead
Total
Increase 1980 vs 1979

Question Number 1
Are unit costs per bale rising or falling betweeen 1979 or 1980? Support your answer with t
The unit cost per bale is falling between 1979 or 1980. The result can be supported by the

In Arctic Insulation Summary 1 table, the cost per Bale is increasing, but the cost is not eve
hour in Purchase method is more than the number of bales processed in Formed method, b

In Arctic Insulatio nSummary 2 table, the cost per bale is calculated on the basis of the num
calculation. And in this table, the cost per bales has been reducing by $1.04 from 1979 to 1

Question Number 2
What inferences do you draw regarding the cost control issue which is of concern to the pre
As we can see the total number of bales in 1979 were 1355000 and that in 1980 were 1650
be easily deduced that the organization has achieved better position in cost by processing
This could be achieved by reducing the propotion of investement in Formed method and in
method is much more than the number of bales processed per hour in Formed method. Hen
And the total cost per unit has significantly reduced by $1.04 per bale from 1979 to 1980.

Question Number 3
Whar recommendation would you make regarding Summary Cost Reports for collection and
Collection and Baling Costs incur three costs
1. Direct Labor
2. Depot Overhead
3. Divisional Overhead
The cost of Raw Material i.e. Paper is not included in the Collection and Baling Costs, instea

According to me calculation method used in Exhibit 2 i.e. on the basis of the number of bal
Also as we can see the with the reduction cost of bulk paper and the increase in the propor
reduce, we can increase the proportion of the Purchased Bales as compared to Formed Bale
Also the cost of abour to precess a bales in Formed case is much high, we can reduce that

1. Direct Labor
2. Depot Overhead
3. Divisional Overhead
The cost of Raw Material i.e. Paper is not included in the Collection and Baling Costs, instea

According to me calculation method used in Exhibit 2 i.e. on the basis of the number of bal
Also as we can see the with the reduction cost of bulk paper and the increase in the propor
reduce, we can increase the proportion of the Purchased Bales as compared to Formed Bale
Also the cost of abour to precess a bales in Formed case is much high, we can reduce that

Question Number 4
What other advice do you have for the president?
Reducing the costs Marginally from the Overheads, like the labour costs per bale and increa
margins

Case Artic Insulation, Rashik Gupta

1979
$

4,296,000.00

$
$
$
$
$
$
$

1,875,000.00
101,000.00
36,000.00
53,000.00
55,000.00
758,320.00
2,878,320.00

67.0%

3,522,710.00

82.0%

10,697,030.00
1,075,000.00
280,000.00
1,355,000.00

Total Number
2.5 $
1 $
16 $
1 $

79.3%
20.7%
100.00%

Cost
9.50
3.80
9.50
0.59

1979
Bales Processed Per hour
2.5

1980
Total Hours
430,000.00

Total Number
792,000.00

16

17,500.00
447,500.00

1979
$

Cost per Bale

4,128,000.00

2,765,760.00

2.57

$
$

3,384,950.39
10,278,710.39

$
$

3.15
9.56

$3.84 calculated above

Cost Per Bale

168,000.00

0.60 calculated above

112,560.00

0.40

$
$

137,760
418,320

$
$

0.49
1.49

1979
$

Cost per Bale

4,128,000.00

$3.84 calculated above

2,283,538

2.12

$
$

2,794,770
9,206,307.93

$
$

2.60
8.56

858,000.00

Cost Per Bale

168,000.00

0.60 calculated above

594,781.99

2.12

$
$

727,940
1,490,722

$
$

2.60
5.32

en 1979 or 1980? Support your answer with the relevant cost calculations
or 1980. The result can be supported by the figures represented in Arctic Insulation Summary 2 table above.

per Bale is increasing, but the cost is not evenly distributed among the Formed and Purchased method. As the n
mber of bales processed in Formed method, but the cost is calculated on hour basis.

per bale is calculated on the basis of the number of bales processed by a particular method. hence this is the m
es has been reducing by $1.04 from 1979 to 1980, hence the cost per bale is falling.

st control issue which is of concern to the president? How well were the costs controlles in 1980?
79 were 1355000 and that in 1980 were 1650000. Also the total cost in 1979 were $10697040 while that in 198
chieved better position in cost by processing more number of bales in lesser cost.
tion of investement in Formed method and increasing the proportion in Purchased method because the number
es processed per hour in Formed method. Hence the organization has been able to redice the costs.

duced by $1.04 per bale from 1979 to 1980.

ding Summary Cost Reports for collection and baling depots

ded in the Collection and Baling Costs, instead it is assigned to the shredding and bagging plants.

xhibit 2 i.e. on the basis of the number of bales processed per hour is the more appropriate way to calculate the
t of bulk paper and the increase in the proportion of the Purchased Paper, the costs per bale reduced. If the price
Purchased Bales as compared to Formed Bales
rmed case is much high, we can reduce that cost by comparing it with what market has been offering

ent?
eads, like the labour costs per bale and increasing the number of Purchased Bales in proportion to Formed Bales

ashik Gupta
1980
$

3,556,080.00

$
$
$
$
$
$
$

2,019,000.00
97,000.00
43,000.00
46,000.00
59,000.00
651,990.00
2,915,990.00

82.0%

3,164,900.00

89.0%

9,636,970.00
792,000.00
858,000.00
1,650,000.00

Formed Per Bale Cosst

$3.84 Approx.

Purchased per Bale Cost

$0.60 Approx.

1980
Bales Processed Per hour
2.50

48.0%
52.0%
100.0%

Total Hours
316,800.00

16

53,625.00
370,425.00

1980
$

Cost per Bale

3,041,280.00

2,493,853.36

3.15

$
$

2,706,729.62
8,241,862.98

$
$
$

3.42
10.41
0.84

$3.84 calculated above

Cost Per Bale

514,800

0.60 calculated above

422,137

0.49

$
$

458,170
1,395,107.02

$
$
$

0.53
1.63
0.13

1980
$

Cost per Bale

3,041,280.00

$3.84 calculated above

1,399,675

1.77

1,519,152

$
$
$

1.92
7.53
1.04

Cost Per Bale

514,800

0.60 calculated above

1,516,314.80

1.77

$
$

1,645,748
3,676,863

$
$
$

1.92
4.29
1.04

ulation Summary 2 table above.

ed and Purchased method. As the number of bales processed per

r basis.

rticular method. hence this is the most appropriate method of cost

falling.

s controlles in 1980?
were $10697040 while that in 1980 was $9636970 hence it can
cost.
ased method because the number of bales processed in Purchase
ble to redice the costs.

g and bagging plants.

re appropriate way to calculate the per bale cost.

e costs per bale reduced. If the prices remain stagnant or further

market has been offering

Bales in proportion to Formed Bales would increase the profit