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Q: What conclusions can you draw about the use of traditional costing versus ABC costing for the Blake Company? What recommendations do you have for
Q: What conclusions can you draw about the use of traditional costing versus ABC costing for the Blake Company? What recommendations do you have for the president?
| Flops | Chops | |
| Sales Price per Unit | $200 | $600 |
| Direct Materials per Unit | $100 | $300 |
| Direct Labor Cost per Unit | $30 | $50 |
| Direct Labor Hours per Unit | 2 | 6 |
| Number of Units Produced | 30,000 | 20,000 |
Traditional Costing System based
| Flops | Chops | Total | ||||
| Predetermined Variable overhead rate | $1,633,333 | $3,266,667 | $4,900,000 | |||
Traditional Costing System based
| Flops | Chops | |||
| Unit Product Costs | $214.44 | $763 | ||
| Contribution Margin per Unit | -$14.44 | -$163 | ||
ABC costing system based
| Activity Cost Pool | Estimated Overhead Cost | Expected Activity Level | Predetermined Overhead Rate | |||
| Setups | $860,000 | 200 | setups | $4,300 | ||
| Scrap | 400,000 | 500 | units | $800 | ||
| Testing | 300,000 | 5,000 | tests | $60 | ||
| Machine Related | 2,440,000 | 100,000 | machine related | $24 | ||
| Total | $4,000,000 | |||||
ABC costing based
| Direct Material per Unit | $100 | $300 |
| Direct Labor per Unit | $60 | $300 |
| Manufacturing Overhead | $27 | $160 |
| Production Cost | $187 | $760 |
| Contribution Margin per Unit | $13 | -$160 |
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