Zauner
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ZAUNER ORNAMENTS
1. Determine the best base for allocating plant-administration costs
Yu started to think about costing on volume basis and then o a direct labour/direct material basis. In both cases the analysis did not seem to confident cause of the missing data on employed people working on the plant. By relating the direct labour cost with the people employed, from the data of the plant administration cost, we can estimate the workers employed per each ornament box.
We are given that the specialty ornaments do have 24 extra people for painting.
Given the total direct labour costs and the number of plant personnel, we can calculate the cost for each person, i.e. $ 520,000.00/122= $ 4,262.29.
By having this data we can estimate the numbers of employees per each product
Basic ornaments
83.200,00
Large ornaments
93.600,00
Specialty ornaments
102.200,00
241.000,00
520.000,00
Given the plant administration costs related to the people employed we will consider the plant administration and the plant depreciation as a cost driver.
Customers number can not be taken as a reference cause of the non relevant data given by Exhibit 4
2. Calculate the ABC costs for each product on a per box basis
In order to calculate the ABC costs for each product we do have to evaluate the cost drivers and also he value each product is contributing to general turnover.
Boxes
Total $
RANK
Small
35.000
315000
large
50.000
550000
Specialty
100.000
1700000
185.000
2.565.000,00
By having attributed the rank to each product, we are able to allocate the percentage of each product on the total volume and on the turnover .
value $
% value
boxes
% boxes
specialty
1.700.000,00
66,28
100.000
54,05
large
550.000,00
21,44
50.000
27,03
small
315.000,00
12,28
35.000
18,92
From this schedule it appears that to calculate to apply a direct relation as abc costing, would provide a better analysis than only referring to the volume or the materials employed.
Small
Large
Specialty
Direct labour
83.200,00
93.600,00
343.200,00
Direct Materials
56.800,00
156.400,00
356.800,00
Total
140.000,00
250.000,00
700.000,00
Direct labour per box
3,43
Direct Materials per box
3,57
Total per box
7,00
Overheads
6,14
12,27
10,32
13,14
The overheads have been determined on following basis
Small
Large
Specialty
Production scheduling
85.000,00
16.081,08
22.972,97
45.945,95
Machine setups
160.000,00
99.740,26
49.870,13
10.389,61
Equipment depreciation
220.000,00
14.392,52
41.121,50
164.485,98
Plant depreciation
150.000,00
24.590,16
27.049,18
98.360,66
Quality inspection
70.000,00
4.579,44
13.084,11
52.336,45
Packing
185.000,00
80.937,50
57.812,50
46.250,00
Plant administration
300.000,00
49.180,33
54.098,36
196.721,31
1.170.000,00
289.501,29
266.008,75
614.489,96
Overheads per box
6,14
a) production scheduling costs have been calculated on the base of box produced
b) machine set up is calculated on the number of machine set-ups per box
Machine set ups
machine operations small
machine operation large
machine operation special
Total machine operations
c) equipment depreciation has been calculated on the number of boxes produced
d) plant depreciation, as plant administration have been calculated on the employees basis
e) Quality inspection has been calculated on the basis of information given in Exhibit 3 (1 x small ornaments, 2 x large ornaments, 4 x Specialty ornaments)
Boxes
185.000
Quality inspection small
35.000
Quality inspection large
100.000
Quality inspection specialty
400.000
Total quality inspections to be
performed
535.000
f) Packing has also been calculated on the basis of the information given in Exhibit n. 3 (footage small 1.0, footage large 0.2, footage specialty 0.5)
Packing
Sq footage small
35000
sq footage large
25000
sq footage special
20000
Total