Kappa Manufacturing

Scenario: Implement ABC

Data:

• Cost Pools and Cost Drivers:
  • Setup Costs: $80,000, Cost Driver: Number of setups
  • Quality Control Costs: $120,000, Cost Driver: Number of inspections

Requirements:

1. Allocate setup costs based on the number of setups.
2. Allocate quality control costs based on the number of inspections.
3. Calculate the overhead rate for each cost pool.
4. Discuss the advantages of implementing ABC for cost management at Kappa Manufacturing.
5. Recommend cost reduction strategies based on the insights from ABC analysis.