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Special costing model
Containing 2 stages:yFirst stage of allocation
ySecond stage of allocation
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ACTIVITY
TOOL
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Mono-relayy0.75 hour of Direct Labortime per unit
Bi-relay
y1 hour of Direct Labor timeper unit
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POHR
ESTIMATED TOTAL MANUFACTURING
OVERHEAD COSTS
ESTIMATED TOTAL DIRECT LABOR
HOURS
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Mono-relay Bi-relay
Manufacturing
overhead
$ 1,000,000 $ 1,000,000
Units produced 40,000 10,000
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Mono-relay Bi-relay
Manufacturing
overhead
1,000,000 1,000,000
Units
produced40,000
(0.75 hours)
10,000
(1 hour)
POHR:
1000000/[(40000*0.75)+(10000*1)]=
25$ Per directLabor hours
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Mono-relay Bi-relayDirect Material 35$ 48$
Direct Labor(12$ per hour) 9$ 12$
Manufacturing
Overhead
25$*0,75hour=
18,75$
25$*1hour=
25$
UNIT
PRODUCT
35+9+18,75=
62,75$
48+12+25=
85$
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Total cost Total ActivityMaint. Parts
inventory$ 180,000 225
ProcessingPurchase order
90,000 1,000
Quality control 230,000 5,750
Machine related 500,000 10,000
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Total
cost
Total
Activity
Activity Rate
Maint. Parts
inventory
180,000 225 800$ per number of
part types
Processing
Purchaseorder
90,000 1,000 90$ per number of
order
Quality
control
230,000 5,750 40$ per number of
tests
Machine
related
500,000 10,000 50$ per machine
hours
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Activity Rate Mono
relay
Manufacturing
Overhead cost
aint. Parts
nventory
800$ per
number of
part types
75 800*75=
60,000
rocessing
urchaserder
90$ per
number oforder
800 72,000
uality control 40$ per
number oftests
2,500 100,000
achine
elated
50$ per
machine
hours
4,000 200,000
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=60,000+72,000+200,000+100,000
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Activity Rate --
relayrelay
Manufacturing
Overhead cost
aint. Parts
nventory
800$ per
number ofpart types
150 800*150=
120,000
rocessing
urchaserder
90$ per
number oforder
200 18,000
uality control 40$ per
number of
tests
3,250 130,000
achine
elated
50$ per
machine
hours
6,000 300,000
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=120,000+18,000+130,000+300,000
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MANUFACTURING OVERHEAD
COST PER UNITMONO-
RELAY
BI-
RELAY
UNTS PRODUCED 40,000 10,000
TOTAL MAN.
OVERHEAD
432,000 568,000
MANUF. OVERHEAD.
COST PER UNIT
10.8$ 56.8$
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UNIT COST FOR
= DIRECT MATERIALS + DIRECT LABOR + MANUFACTURINGOVERHEAD
DRECT
MATERIAL
DIRECT
COST
MANUFACTURING
OVERHEAD
MONO-RELAY
35 9 10.8
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UNIT COST FOR
=35+9+10.8
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UNIT COST FOR
= DIRECT MATERIALS + DIRECT LABOR + MANUFACTURINGOVERHEAD
DRECT
MATERIAL
DIRECT
COST
MANUFACTURING
OVERHEAD
BI-RELAY
48 12 56.8
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UNIT COST FOR
=48+12+56.8
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MONORELAY
BI RELAY
TRADITIONAL
WAY 62,75$85$
ACTIVITYBASEDCOSTING
54.8$ 116.8$
DIFFERENCE (12,7)$ 37.41$
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Quality controlNumber of tests
Mono relay Bi relay2,500 3,250
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Maintaining partsNumber of parts types
Mono relay Bi relay
75 150
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Machine Related
Machine hours required
Mono relay Bi relay4000 6000
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Bi-relay
Traditionallyunit cost
Activity basedcost
85$ 116.8$
DIFFERENCE:
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