Classic Pen Co$.$: Developing an ABC Model

Harvard Business School Case #$103-015$

Case Software # XLS$-666-$ Classic Pen Company: Developing an ABC Model

"Exhibit $1$

Boulevard Sandwiches, Inc. $($B$)$

Operating Statement $"$

$2018$ Actual $2018$ Plan

Gross Sales $1,936,025\mathrm{.}001,861,860\mathrm{.}00$

Net Sales Food $1,726,725\mathrm{.}001,761,760\mathrm{.}00$

Labor $1,025,870\mathrm{.}001,024,023\mathrm{.}00$

Other Operating Expenses $185,800\mathrm{.}00199,095\mathrm{.}00$

Advertising $152,450\mathrm{.}00148,949\mathrm{.}00$

Miscellaneous $78,625\mathrm{.}0065,165\mathrm{.}00$

Depreciation $3,320\mathrm{.}003,000\mathrm{.}00$

Insurance $24,000\mathrm{.}0024,000\mathrm{.}00$

Licenses and Fees Rent $($Base$)9,780\mathrm{.}009,400\mathrm{.}00$

Rent $($Overage$)10,940\mathrm{.}0011,700\mathrm{.}00$

Management $72,000\mathrm{.}0072,000\mathrm{.}00$

Profit $6,801\mathrm{.}003,093\mathrm{.}00$

$98,000\mathrm{.}0095,000\mathrm{.}00$

$$59,139$ $$106,335$

$1.$ Based on the activity information collected by Dempsey determine the Overhead applied to each product under ABC cost model by

a$.$ Identifying the activities under the ABC model presented

b$.$ Determining the total cost per activity under the ABC model presented

c$.$ Determine the cost$-$driver for each activity

d$.$ Determine the $ rate per cost driver unit identified in $($c$)$

e$.$ Calculate the overhead for each of the four products

$2.$ Prepare a new income statement based on ABC overhead costs for each of the four products.

"Exhibit $3$

Boulevard Sandwiches, Inc. $($B$)$

Schedule of Staff Hours and Wages" Supporting Data

$2018$ Actual $2018$ Plan Average weekly customer count $4,0253,850$

Kitchen Staff $\%$ customers$$lunch $50\%40\%$

Hours worked $8,0008,000\%$ customers$$dinner $50\%60\%$

Average wages per hour $$12\mathrm{.}51$ $$13$ Average gross check$$lunch $$7\mathrm{.}50$ $$7\mathrm{.}50$

Average net check$$lunch $$6\mathrm{.}50$ $$7\mathrm{.}00$

Cashiers and Servers Average gross check$$dinner $$11\mathrm{.}00$ $$10\mathrm{.}50$

Hours worked $26,40032,032$ Average net check$$dinner $$10\mathrm{.}00$ $$10\mathrm{.}00$

Average wages per hour $$3\mathrm{.}25$ $$3\mathrm{.}00$