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FINAL TEST CASE STUDY
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Efrizal
29115254
Mr. Erman Sumirat(erman.sumirat@gmail.com/erman.sumirat@sbm-itb.ac.id)
DESTIN BRASS PRODUCTS CO.
4. Assume that interest in new basis for cost accounting at Destin Brass Products remain high. In the following month. Quantities produced and sold
activitis
and cost were all at standard. How much higher or lower would the net income reported under the activity-transaction-based system be th
the net income
that will be reported under the present, more traditional system? Why?
1. Use over Head cost analysis in exibit 5 and other data on manufacturing cost to estimate product cost, for valves, pumps and flow controllers
ABC ALLOCATION BASIS
Description
Machine Depreciation
Receiving
Material Handling
Engineering
Packing & Shipping
Maintenance
Allocation Base
Hour of Use
Transactions
Transactions
Work Order %
Transactions
Hour of Use
Total
10800
129
129
1
30
10800
34.72%
3.10%
3.10%
20%
3.33%
34.72%
57.87%
19.38%
19.38%
30.00%
23.33%
57.87%
7.41%
77.52%
77.52%
50%
73.33%
7.41%
Valve
7500
Pumps
12500
Flow Controller
4000
Valves Cost
Allocation
Cost Decription
Direct Cost
Material
Direct Labor
TOTAL DIRECT COST
Manufacturing Overhead
Machine Depresiation
Set-up Labor
Receiving
Material Handling
Engineering
Packing & Shipping
Maintenance
TOTAL OVER HEAD COST
TOTAL COST
Pumps Cost
Allocation
120000
30000
150000
16
4
20
250000
100000
350000
20
8
28
88000
25600
113600
93750
128
620
6202
20000
2000
10417
12.5
0.02
0.08
0.83
2.67
0.27
1.39
17.75
37.75
156250
640
3876
38760
30000
14000
17361
12.5
0.05
0.31
3.10
2.4
1.12
1.39
20.87
48.87
20000
1920
15504
155039
50000
44000
2222
2. Compare the estimate cost you calculate to existing standard unit cost (exibit 3)and revised unit cost (exibit 4) what causes the different product
costing methode to produce such different results
$
$
$
$
$
16.00 $
4.00 $
20.00 $
17.56 $
37.56 $
Pumps Standard
Cost
16.00 $
4.00 $
20.00 $
17.75 $
37.75 $
20.00 $
8.00 $
28.00 $
35.12 $
63.12 $
Flow Controller
Standard Cost
20.00 $
8.00 $
28.00 $
20.87 $
48.87 $
22.00
6.40
28.40
28.10
56.50
REVISED COST
Cost Description
Direct Cost
Material
Direct Labor
Total Direct Cost
Manufacturing Overhed
Material Overhead
Set-up Labor
Other Overhead
Total Overhead
REVISED UNIT COST
Valves
Pumps
Flow Controllers
16
4
20
20
8
28
22
6.4
28.4
7.68
0.02
21.3
29
49
9.6
0.05
21.3
30.95
58.95
10.56
0.48
8.52
19.56
47.96
Based on the table above, there is a difference in the unit cost. The difference is due to the allocation of overhead of each activity. The calculation of
direct cost and indirect cost.
The direct cost for both costing methods contain material and direct labor but for revised costing, they have an additional direct cost, which is the set
overhead cost.
As for the indirect cost, under the standard costing, allocation of total overhead cost was assigned to the production on the basis of production-run la
of run, it will cause $4.39 of overhead to be allocated to the product which labor was applied.
Under the revised costing, the overhead is being divided into material related overhead and other overhead. The material related overhead includes
materials handling cost which has a rate of 48% of material cost and the rest of the overhead cost is allocated under other overhead. The total overhe
overhead is then divided by the total machine hour, which has a rate of $42.59 per machine hour.
3. I think its beter to use Revised costing because the total cost that result by this calculation lower than the others (standard costin
and of course I will recomend to use Revised Costing to manager Destin Brass product
4. Please see the calculation below for answering this question
From the calculation we can see that if we use Revised Standard Cost , we will get higher net income if compare with the others
NET INCOME UNDER DIFFERENT COST SYSTEM
DESCRIBTION
Unit Produced
Gross Margin
STANDARD COSTING
Valves
Pumps
Flow Controllers
NET INCOME
57.78
81.26
97.07
37.56
63.12
56.5
20.22
18.14
40.57
7500
12500
4000
35%
22%
42%
57.78
81.26
97.07
37.75
48.87
100.57
20.03
32.39
-3.50
7500
12500
4000
35%
40%
-4%
57.78
81.26
97.07
49
58.95
47.96
8.78
22.31
49.11
7500
12500
4000
15%
27%
51%
w controllers
ifferent product
w controllers
Flow Controller
Cost per Unit3
TOTAL
22
6.4
28.4
5
0.48
3.88
38.76
12.5
11
0.56
72.17
100.57
ifferent product
Flow Controller
ABC Cost
$
$
$
$
$
22.00
6.40
28.40
72.17
100.57
270000
2688
20000
200000
100000
60000
30000
Flow Controller
Revised Cost
28.4
19.56
47.96
Net Income
151650
226750
162280
540680
150234
404863
-14005
541092
65850
278875
196440
541165