ABC In Class Hands On Example - Traditional Method Information Page
BUDGETED (PROJECTED) FORYEAR 202X
	Product A	Product B	Product C	Totals
Units To Be Produced for the Year	90,000	85,000	8,500	183,500
D.L. Hours Projected for the Year	135,000	125,000	1,000	261,000
Projected Budgeted Overhead for the Year	Amount
TOTAL BUDGETED O.H.	$ 2,300,000
Step # 1 Calculate the Overhead Application Rate Using a Traditional Volume Based Driver for the Next Year
Use Direct Labor Hours as the Overhead Cost Driver
Step # 2 - Assign the Direct Material Costs, Direct Labor Costs and Apply Overhead Costs Based On the Actual January Results
ACTUAL RESULTS FOR THE MONTH OFJANUARY 202X
	Product A	Product B	Product C	Totals
Units Actually Produced	7,200	7,000	800	15,000
Actual D.L. Hours to Produce	10,500	9,500	90	20,090
Actual D.L. Cost	$ 90,500.00	$ 100,000.00	$ 1,900.00	$ 192,400.00
Actual D.M Cost	$ 220,000.00	$ 350,000.00	$ 80,000.00	$ 650,000.00

TRADITIONAL METHOD:
Calculate the Overhead Application Rate:
		Product A	Product B	Product C	Totals
Units To Be Produced for the Year	90,000	85,000	8,500	183,500
D.L. Hours Projected for the Year	135,000	125,000	1,000	261,000
Projected Budgeted Overhead for the Year	Amount
TOTAL BUDGETED O.H.		$ 2,300,000
			OH Application Rate
TOTAL BUDGETED O.H. $			#DIV/0!	per D.L. Hour
TOTAL D.L. Hours
ACTUAL RESULTS FOR THE MONTH OF JANUARY 202X
		Product A	Product B	Product C	Totals
Units Actually Produced		7,200	7,000	800	15,000
Actual D.L. Hours to Produce		10,500	9,500	90	20,090
Actual D.L. Cost		$ 90,500.00	$ 100,000.00	$ 1,900.00	$ 192,400.00
Actual D.M Cost		$ 220,000.00	$ 350,000.00	$ 80,000.00	$ 650,000.00
January - Product Costs
	OH Rate	Product A	Product B	Product C
D.L. Cost
D.M Cost
Overhead Applied	#DIV/0!
TOTAL COST		$ -	$ -	$ -
Units Produced
Per Unit Cost
Our Price(130% of cost)		$ -	$ -	$ -
Competitor's Price		$ 73.00	$ 98.00	$ 195.00

ABC In Class Hands On Example - Information Page
BUDGETED (PROJECTED) FOR YEAR 202X
	Product A	Product B	Product C	Totals
Units To Be Produced for the Year	90,000	85,000	8,500	183,500
D.L. Hours to Produce for the Year	135,000	125,000	1,000	261,000
D.L. Cost for the Year	$ 1,200,000	$ 1,300,000	$ 19,000	2,519,000
D.M Cost for the Year	$ 2,750,000	$ 4,500,000	$ 1,000,000	8,250,000
Machine Hours for the Year	25,000	31,000	80,000	136,000
Inspection Hours for the Year	-	11,000	8,000	19,000
Engineering Hours for the Year	500	500	3,000	4,000
Facility Use (Square Feet) for the Year	10,000.00	5,000.00	5,000.00	20,000.00
Projected Budgeted Overhead	Amount	Cost Pool Driver
Machine Cost Pool	$ 800,000	Machine Hours
Inspection Cost Pool	$ 550,000	Inspection Hours
Engineers Cost Pool	$ 350,000	Engineering Hours
Facility & General Cost Pool	$ 600,000	Square Footage
TOTAL BUDGETED O.H.	$ 2,300,000
Step # 1 Calculate the ABC Overhead Application Rate
Step # 2 - Assign the Direct Material Costs, Direct Labor Costs and Apply Overhead to the Actual January Results
ACTUAL RESULTS FOR JANUARY 202X:
	Product A	Product B	Product C	Totals
Units Produced	7,200	7,000	800	15,000
D.L. Hours to Produce	10,500	9,500	90	20,090
D.L. Cost	$ 90,500.00	$ 100,000.00	$ 1,900.00	$ 192,400.00
D.M Cost	$ 220,000.00	$ 350,000.00	$ 80,000.00	$ 650,000.00
Machine Hours	2,500	3,200	6,500	12,200
Inspection Hours	-	700	900	1,600
Engineering Hours	35	42	260	337
Facility Use (Square Feet)	10,000.00	6,000.00	5,000.00	21,000.00

ABC METHOD:
Step 1 - Calculate Overhead Pool Application Rates:
		Product A	Product B	Product C	Totals
Units To Be Produced for the Year		75,000	80,000	8,000	163,000
D.L. Hours to Produce for the Year		119800	120000	1,200	241,000
D.L. Cost for the Year		$ 1,237,500	$ 1,320,000	$ 19,200	2,576,700
D.M Cost for the Year		$ 2,775,000	$ 4,560,000	$ 1,096,000	8,431,000
Machine Hours for the Year		25,000	31,000	80,000	136,000
Inspection Hours for the Year		-	11,000	8,000	19,000
Engineering Hours for the Year		500	500	3,000	4,000
Facility Use (Square Feet) for the Year		10,000.00	6,000.00	5,000.00	21,000.00
Projected Budgeted Overhead		Amount	Cost Pool Driver
Machine Cost Pool		$ 800,000	Machine Hours for the Year
Inspection Cost Pool		$ 550,000	Inspection Hours for the Year
Engineers Cost Pool		$ 350,000	Engineering Hours for the Year
Facility & General Cost Pool		$ 600,000	Square Footage for the Year
TOTAL BUDGETED O.H.		$ 2,300,000
Machine Cost Pool			Application Rates
TOTAL MACHINE COST
TOTAL MACHINE HOURS			0
Inspection Cost Pool
TOTAL INSP COST
TOTAL INSP HOURS			0
Engineering Cost Pool
TOTAL ENGINEERING COST
TOTAL ENGINEERING HOURS			0
Facility Cost Pool
FACILITIES & GEN COST				Convert Yearly Rate to Monthly/12
TOTAL SQ FT			0	0	Per Month
Step 2 - Assign Direct Costs and Apply Overhead to Actual Results
ACTUAL RESULTS FOR JANUARY 202X:
		Product A	Product B	Product C	Totals
Units Produced		7,200	7,000	800	15,000
D.L. Hours to Produce		10,500	9,500	90	20,090
D.L. Cost		$ 90,500.00	$ 100,000.00	$ 1,900.00	$ 192,400.00
D.M Cost		$ 220,000.00	$ 350,000.00	$ 80,000.00	$ 650,000.00
Machine Hours		2,500	3,200	6,500	12,200
Inspection Hours		-	700	900	1,600
Engineering Hours		35	42	260	337
Facility Use (Square Feet)		10,000.00	6,000.00	5,000.00	21,000.00
	OH Rate	Product A	Product B	Product C
D.L. Cost
D.M Cost
Machine Applied OH	0
Inspection Applied OH	0
Engineers Applied OH	0
Facility & General Applied Overhead	0
TOTAL COST
Units Produced
Per Unit Cost
Our Target Price(130% of cost)		$ -	$ -	$ -
Competitor's Price		$ 73.00	$ 98.00	$ 195.00
What We Have Learned:
Traditonal Method		Product A	Product B	Product C
Cost Per Unit (Traditional Method)		$ -	$ -	$ -
Target Price Per Unit (Traditional Method)	$ -	$ -	$ -
Competitior Price Per Unit		$ 73.00	$ 98.00	$ 195.00
ABC Method
Cost Per Unit (ABC Method)		$ -	$ -	$ -
Target Price Per Unit (ABC Method)		$ -	$ -	$ -
Competitor's Price		$ 73.00	$ 98.00	$ 195.00

1.Using a Traditional Costing method to allocate overhead, what is the per unit cost you calculated for Product A, Product B and Product C?

2. Using an Activity Based Costing method to allocate overhead, what is the per unit cost you calculated for Product A, Product B and Product C?

3. Based on your analysis, the results could be described best by the following statement :