GG Toys Calculation

Calculation of Overhead Rate per Overhead Cost Pool Machine Related Plan Plantt man manag agem emen entt and and fac facili ilities ties Set-up labor Recei eceivi ving ng and and pr produc oducti tion on Cont Contrrol Pacaging and Shipping

cost driver Cost Driver Machine Hours No.of .of pr produ oductio ction n uni units ts No.of production Setups No.o No.off Pr Produc oducti tion on runs runs No.of Shipments

Allocation of Overhead cost to the products Overhead Costs Rate per unit of Cost drivers Machine Runs ! "#.## Plant management and facilities ! ".$% Set-ups ! %&.%" Production Runs ! '(".'# No.of Shipments ! ")".$'  *otal  *otal Overhead for product product Cost of Overhead per unit Gross prot after implementing the Overhead cost +eo,re Doll Direct abor cost ! Direct Material Cost ! /llocated Overhead cost ! 1nit Cost ! Selling Price ! +ross Margin ! +ross Margin 3

'.## ).## 0.'& ").'& &".## ).2% &03

Gross Margin by traditional method +eo,re Doll Direct abor cost ! Direct Material Cost ! Manufacturing Overhead Cost ! 1nit Cost ! Selling Price ! +ross Margin ! +ross Margin 3

'.## ).## ""."( "(."( &".## ".%" (3

Comparitive Analysis of Gross Margin  *raditional  *raditional 4Single 4Single /llocation /llocation 5ase6 /ctivit 5ased Costing 4/5C6

+eo,re Doll (3 &03

/nalsis

*raditional costing resulted in over costing of +eo,re Dolls

 *otal Cost ! ! ! ! !

/ctivit evels

Rate per unit of Cost drivers ""7&## ! "#.## &07### ! ".$% "2" ! %&.%" "2" ! '(".'# ')# ! ")".$'

""&7### $#7### "'7''' 2'7### )'7###

+eo,re Doll /ctivit

8"#2 Doll ! ! ! ! ! !

8"#2 Doll ! ! ! ! ! !

 8"#2 Doll '$3 $3

+eo,e Cost '0)# ! 0)## ! "# ! "# ! "# ! ! !

'.0) 2.## &$.22 '$.$" '2.## ".)( $3

'.0) 2.## "'.(( &'.0$ '2.## "&.&2 '$3

8 "#2 /ctivit '07)##.## ""7"""."" %&%."$ '7("'.#$ "7)"$.&( )$7%22.)% 0.'&

Cradles ! ! ! ! ! !

0.)# "&.## $."$ &'.2$ '#.## 2.'2 &"3

Cradles ! ! ! ! ! !

0.)# "&.## $.&# &'.0# '#.## 2.'# &"3

Cradles &"3 &"3

"&## $### "## "## &&#

 *raditional costing resulted No signi9cant di,erence in under costing of 8"#2 bet:een the t:o costing Dolls because the are based on the same allocation base.

8"#2 Cost Cradles /ctivit Cradles Cost ! "&7###.## # ! ! )7(&).(' '7### ! $7$$$.$$ ! %7&%".'0 # ! ! '(7"'#.$' " ! '(".'# ! ''7'"$.&( )# ! 07)0".$' ! (%72)&.#" ! "&7$#0."% ! &$.22 ! $."$