% of Sales

Estimated Production (2015):

36,000

80%

Standard Chairs
28800

List Price

400

Revenues

11,520,000

Direct Material Costs

183

Conversion Costs:

5270400

Direct Labor
DL hours

1,296,000

10

3.5 3.5x$10/hr

1,008,000

Manufacturing Overhead:
Equipment Depreciation

$103,200
$92,244

Supervision

$72,000

Maintenance

$17,000

Quality Control

$35,000

Rework

4.0x$10/lh

4,262,400

Suppiles

129600

50,000

Tax & Insurance

285,120

Total Manufacturing Overhead

Total Conversion Costs $1,950,564

654,564

Blended Overhead Rate

Total O/H / Total DL Used

20%

654,564/129,600

$5 5x3.5=$17.5

Gross Margin
GM Per unit

$504,000

5x4.0=$20

3,758,400
130.5
Standard
Direct Material
Direct Labor

$183
35

Special-Order
$225
40

Manufacturing Overhead
3.5DLH*$5
4.0DLH*$5
Total Unit Product Cost

Standard

Volume
Sales Price
Sales Revenue
Direct Material
Direct Labor
Overhead
Gross Margin
Profit Margin
Per Unit

$183
35
17.5
$164.50

$235.50

20
$285.00

Special-Order

28,800
$400

17.5

7,200

Conversion

Standard

$515

$11,520,000
5,270,400
1,008,000
504,000
$4,737,600
41.13%
$164.50

225
40
20
$230.00

$3,708,000
1620000
288,000
144,000
$1,656,000
44.66%
$230.00

35+17.5
40+20
Per Unit Conv.

$52.50
$52.50

Special Order ChairTotal

7200
36,000
515
3,708,000
225
1620000

6890400

$288,000
$1,332,000

$144,000

$1,188,000
$165

$295.50

Product Cost

Standard

Direct Material
Direct Labor
Overhead
Conversion
Conversion %

Special-Order

60
$60.00

$183
35
17.5

5,270,400
1,008,000
504,000

Special-Order

225
40
20

1620000
288,000
144,000

$6,782,400

$2,052,000

$1,512,000
22.29%

$432,000
21.05%

$8,834,400

<--Total Product Cost

Department
Operating

# of people

Sq ft

% of Sq ft

Equip. Depr.

DL+Supl.+Supe. Tax & Insur.

TOTAL

Cutting

10,000

10.75%

$7,398

$94,209

$21,461

$123,068

Sewing

5,000

5.38%

3,699

188,419

$10,730

202,848

Stuffing

3,000

3.23%

2,219

141,314

$6,438

149,971

Wooden Framing

5,000

5.38%

3,699

164,866

$10,730

179,296

12

10,000

10.75%

7,398

282,628

$21,461

311,486

Reclinging Mechanism

2,000

2.15%

1,480

47,105

$4,292

52,876

Assmebly/Motor Installation

10,000

10.75%

7,398

211,971

$21,461

240,829

Final Assembly

8,000

8.60%

5,918

164,866

$17,169

Upholstery

187,953
$1,448,328 *

Support
Receiving

20,000

21.51%

31,996

47,105

$85,689

Shipping

20,000

21.51%

31,996

117,762

$85,689

62

93,000

100.00%

$103,200

$1,460,244

$285,120

164,790 **
235,447 ***
$1,848,564

Units
Activity

driver

Standard

Set-up (17%)

(hrs)

1,532

Special-Order
1,820

3,352

Cost
$246,216

Per Unit
$73

Standard
$112,531

Special-Order
$133,685

Run (83%)

(hrs)

6,892

9,012

15,904

$1,202,112

$76

$520,935

$681,177

Receiving

Batches

166

176

342

164,790

$482

$79,986

$84,804

Shipping

Batches

166

176

342

235,447

$688

$114,281

$121,166

Quality Control
Maintenance
Rework

(# units)
(requests)
(defective units)

1,800
520
1800

360
104
360

2,160
624
2160

35000
17,000
50,000

$16
$27
$23

$29,167
$14,167
$41,667
$912,733

$5,833
$2,833
$8,333
$1,037,831

/28800
CONVERSION PER UNIT
Cost
Driver
Information:

1)
2)

Department Cost drivers:

-DL + Supplies + Supervision = # people in each department
- 1/3 Equip Depr 1/3 * $103,200
34400

3)

30% of Tax & Insurance = .3*$285,120

Production:
Std chairs
Sales Price

36,000
80%

Special-Order
Sales Price

20%

% Total
$1,448,328 *

/7200

54.30%

61.63%

43.34%

56.66%

$164,790 **

8.45%

48.54%

51.46%

$235,447 ***

12.07%

48.54%

51.46%

1.79%
0.87%
2.56%
100.00%

83.33%
83.33%
83.33%

16.67%
16.67%
16.67%

1,296,000 + 92,244 + 72,000

$1,460,244 /62 people =
$23,552.32 /person
Rec:
17200 Stuffing
17,200 high cost of equipment
Remaining:
68800 /93,000 ft
0.7397849462 per sq. ft
*Basis of sqaure footage to ALL departments
$85,536 Rec:
Stuffing
Remaining

28800 units
$400
$11,520,000 sales

DM: $183

unit

7200 units
$515
$3,708,000 sales

DM: $225

unit

$42,768
$42,768 heavy insurance
$199,584 /93,000 ft

$2 /sq. ft

Standard
Activity Based Costing
Direct Materials
Conversion
Total unit product cost

Standard

Special-Order
$183
$225
$31.69
$144.14
$214.69
$369.14

Standard

Volume
Sales Price

$400

Sales Revenue
Direct Material
Conversion
Gross Margin

$183
$32
$185

Profit Margin

Special-Order

28,800

7,200
$515

$11,520,000
$5,270,400
$912,733
$5,336,867
46.33%

$225
$144.14
$146

$3,708,000
$1,620,000
$1,037,831
$1,050,169
28.32%

Direct Material
Conversion
Conversion %

$183
$32

$5,270,400
$912,733
$6,183,133
14.76%

Special-Order %

45.70%

$35,000
$17,000
$50,000
$1,950,564
/35,000
$144.14
$56

$31.69

Standard %
12.62%

Special-Order Costing

$225
$144.14

$1,620,000
$1,037,831
$2,657,831
39.05%

$8,840,964

Per Unit Product Costs

Per Unit Conversion Costs

Costing Method

Standard

Activity-based costing
Traditional costing

Special-Order
$214.69

$369.14

235.50

285.00

Costing Method
Traditional costing

Special-Order

Costing Method

$31.69

$144.14

52.50

60.00

Standard

Special-Order

Activity-based costing

14.76%

39.05%

Traditional costing

22.29%

21.05%

Per Unit Product Costs

Standard

Sales Revenue
Direct Material
Direct Labor
Overhead
Gross Margin

Standard

Activity-based costing

Traditional Costing

Volume
Sales Price

% Conversion of Total Cost

Special-Order

28,800
$400

$183
35
17.5
$164.50

Profit Margin
per unit

7,200
$515

$11,520,000
5,270,400
1,008,000
504,000
$4,737,600

225
40
20
$230.00

$3,708,000
1620000
288,000
144,000
$1,656,000

41.13%

44.66%

$164.50

$230.00

Per Unit Product Cost

400
350
300
250
200
150
100
50
0

369.14
235.5
214.69

0 0

Per Unit Conversion Costs

285

160
Row 5

140

Row 6

120

0 0

144.1432416711

100
Per Unit Product Cost

Row 5

80
52.5

60

31.6921062489

40

Costing Method

60

20

Per Unit Conversion Costs

ABC Costing

0.45

Standard

Volume
Sales Price
Sales Revenue
Direct Material
Conversion
Gross Margin
Profit Margin
per unit

Special-Order

28,800
$400

$183
$32
$185

46.33%
$185

$225
$144.14
$146

0.3

$3,708,000
$1,620,000
$1,037,831
$1,050,169
28.32%
$146

0.25
Per Unit Product Cost

0.2229299363
0.2105263158

0.2

0.1476165417

0.15
0.1
0.05
0
0 Method
0
Costing

Standard Special-Order

Costing Method

Standard Special-Order

Costing Method

0.35

$515

$11,520,000
$5,270,400
$912,733
$5,336,867

0.3904805111

0.4

7,200

0
0 Method
0
Costing

Row 5
Row 6

Row 6