Module 4 - SLP

Module 4 - SLP

Activity Based Costing of Apple Inc.

Annual

Cost

Annual

Cost

Cost per

Driver

Cost/Activity Center:

Traceable

Driver

Driver

Consumption,

Total Cost,

Cost Drivers

Cost

Activity

Unit

Part H707

Part H707

Quality: Pieces scrapped

$800,000

10,000

$80

120

$9,600

Production scheduling: Setups

50,000

500

100

4

400

Setup: Setups

600,000

500

1,200

4

4,800

Shipping: Containers shipped

300,000

60,000

5

10

50

Shipping admin.: Shipments

50,000

1,000

50

5

250

Production: Machine hours

1,500,000

10,000

150

15

2,250

Total indirect cost

$3,300,000

$17,350

Direct materials

5,000

Direct labor

1,000

Total Cost of Part H707

$23,350

Cost per unit ($23,350 ? 2,000)

 

 

 

 

$11.68

Selling price

7.5

Gross margin

($4.18)

Gross margin percentage

-55.70%

Recommendations for Apple Inc

Assuming that the results of the activity analysis are accurate, product H707 is much more costly than Reliable Machining Product's existing costing system estimates. The existing system is under-costing product H707 by $11.675 - $5.00 = $6.675 per unit or $6.675 ÷ $11.675 = 57%! ...