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Problem 6-18 (continued)
The traditional and activity-based cost assignments differ for two
reasons. First, the traditional system assigns all $2,200,000 of
manufacturing overhead to products. The ABC system assigns only
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280 Managerial Accounting for Managers, 3rd Edition
Exercise 6A-1 (20 minutes)
Sales (80 clubs × $48 per club) ............................
$3,840.00
Green costs:
Direct materials (80 clubs × $25.40 per club) ......
$2,032.00
2,032.00
Green margin ......................................................
1,808.00
Yellow costs:
Direct labor (80 clubs × 0.3 hour per club ×
$21.50 per hour) .............................................
516.00
Indirect labor .....................................................
90.00
Marketing expenses ...........................................
540.20
1,146.20
Yellow margin ......................................................
661.80
Red costs:
Factory equipment depreciation ..........................
106.40
Factory administration ........................................
262.40
Selling and administrative wages and salaries ......
436.00
Selling and administrative depreciation ................
30.00
834.80
Red margin .........................................................
$ (173.00)
While not required in the problem, the conventional ABC analysis would be:
Sales (80 clubs × $48 per club) ............................
$3,840.00
Costs:
Direct materials .................................................
$2,032.00
Direct labor .......................................................
516.00
Volume related overhead ...................................
283.20
Batch processing overhead ................................
53.00
Order processing overhead ................................
118.80
Customer service overhead ................................
1,010.00
4,013.00
Customer margin .................................................
$ (173.00)
