11 Energy 20001 100%|Machine Hours 12 13 Calculation of Allocation Ratio 14 Activity Blue Black Red Purple Total 15 No. of Units 50000 40000 9000 1000 100000 16 Production Run 0.33 0.33 0.25 0.08 150 17 Direct Labor Expense 10000 8000 1800 200 20000 18 Direct Labor 1000 800 180 20 2000 19 Machine Hours 0.5 0.4 0.09 0.01 10000 20 Set-up Time 0.38 0.10 0.43 0.09 526 21 Administration 0.25 0.25 0.25 0.25 22 23 Calculation of Overhead Charges according to Activity-Based Costing 24 Expense Allocated by Blue ($) Black ($) Red ($) Purple ($) Total ($) 25 Indirect Labor Production Run 3333.33 3333.33 2533.33 800.00 10000 26 Set-up Time 3041.83 760.46 3467.68 730.04 8000 27 Administration 500 500 500 500 2000 28 Fringe Direct-Indirect Labor 6750.06 5037.52 3320.41 892.02 16000 29 Computer Systems Production Run 2666.67 2666.67 2026.67 640.00 8000 B D E F G 30 Administration 500 500 500 500 2000 31 Machinary Machine Hours 4000 3200 720 80 8000 32 Maintenance Machine Hours 2000 1600 360 40 4000 33 Energy Machine Hours 1000 800 180 20 2000 34 Total Overhead Expenses 23791.89 18397.97 13608.091 4202.05 60000.00 35 36 Income Statement according to Activity-Based Costing 37 Particulars Blue ($) Black ($) Red ($) Purple ($) Total ($) 38 Sales 75000 60000 13950 1650 150600 39 Material Cost 25000 20000 4680 550 50230 40 Direct Labor 10000 8000 1800 200 20000 41 Overhead 23791.89 18397.97 13608.09 4202.05 60000 42 Total Operating Income 16208.11 13602.03 -6138.09) -3302.05 20370 43 Return on Sales 21.61% 22.67% -44.00% -200.12% 13.53% 44 45 Income Statement according to Traditional Method 46 Particulars Blue ($) Black ($) Red ($) Purple ($) Total ($) 47 Sales 75000 60000 13950 1650 150600 48 Material Cost 25000 20000 4680 550 50230 49 Direct Labor 10000 8000 1800 200 20000 50 Overhead 30000.00 24000.00 5400.00 600.00 60000.00 51 Total Operating Income 10000.00 8000.00 2070.00 300.00 20370 52 Return on Sales 13.33% 13.33% 14.84% 18.18% 13.53% 53 54 Difference between Activity-Based Costing & Traditional Method 55 Particulars Blue Black Red Purple 56 Overhead ($) -6208.11) -5602.03 8208.091 3602.05 57 Operating Income ($) 6208.11 5602.03 -8208.091 -3602.05 58 Return on Sales 8% -59% -218% 9% Formulas used in the tables are: C D G Percentage 0.5 10.4 0.1 Allocated by Production Run Set-up Time Administration Duect-Indirect Labor Production Run Administration Machine Hours Machine Hours Machine Hours 0.8 0.2 1 1 1 A 1 Alloaction based on activity 2 Expense Category Expense (5) 3 Indirect Labor =20000"C3 |-20000 C4 5 |-20000C 6 Fringe 16000 7 Computer Systems -10000*C7 |-10000"CS 9 Machinary 8000 10 Maintenance 4000 11 Energy 2000 12 13 Calculation of Allocation Ratio 14 Activity Blue 15 No. of Units 50000 16 Production Run |-50 F16 17 Direct Labor Expense 10000 18 Direct Labor -0.02'B15 19 Machine Hours -0.1-B15/F19 20 Set-up Time -200 F20 21 Administration 22 23. Calculation of Overhead Charges according to Acti Black 40000 -50 F16 8000 -0.02"CIS -0.1C15F19 |-50F20 Red 9000 -38/F16 1800 -0.02"D15 -0.1*015 F19 -228/F20 Purple 1000 |-12F16 200 -0.02E1S -0.1E15/F19 1-48F20 -1/4 Tota |-SUM(BIS EIS) 150 =SUM(B17E17) 2000 10000 520 14