Unit Cost Under ABC Costing Method

Bright and Shiny Dog Collars Diagram 1 Total Overhead Cost Chart
Total Expected Use of Cost Drivers 10 20 500 500 500 50 Expected Use of Cost Drivers per Product Simple Jeweled 3 7 6 7 225 275 225 275 225 275 15 35

Activity Cost Pools Purchasing Receiving Cutting Assembling Finishing Packing and shipping Total

Cost Drivers Orders Yards Yards Pieces Pieces Cartons

Estimated Overhead 3,000 500 1,800 2,400 1,500 800 $10,000

Diagram 2 Calculation of Cost per Unit for Each Cost Driver

Total Expected Use of Cost Drivers 10 20 500 500 500 50

Activity Cost Pools Purchasing Receiving Cutting Assembling Finishing Packing and shipping Total

Estimated Overhead 3,000 500 1,800 2,400 1,500 800 $10,000 / / / / /

Cost Per Unit = = = = = 300.00 25.00 3.60 4.80 3.00 16.00

Diagram 3 Calculation of the Simple Collar Overhead Cost

Activity Cost Pools Purchasing Receiving Cutting Assembling Finishing Packing and shipping Cost per Unit 300.00 25.00 3.60 4.80 3.00 16.00 Simple X X X X X X 3 6 225 225 225 15 Divided by = = = = = = Total Cost Per Units 900.00 150.00 810.00 1,080.00 675.00 240.00 3,855.00 225 $17.13

Total Overhead Units Produced Cost per Unit

MJC Revised 6/2013

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Unit Cost Under ABC Costing Method

Diagram 4 Calculation of the Jeweled Collar Overhead Cost
Cost per Unit 300.00 25.00 3.60 4.80 3.00 16.00 X X X X X X Total Cost Per Units = = = = = = 3,600.00 6,875.00 990.00 1,320.00 105.00 560.00 $13,450.00 275 $48.91

Activity Cost Pools Purchasing Receiving Cutting Assembling Finishing Packing and shipping

Jeweled 7 7 275 275 275 35 Divided by

Total Overhead Units Produced Cost per Unit

Diagram 5 Unit Product Cost Under ABC Costing Method

Simple Direct Material Direct Labor Overhead Total Unit Cost 0.50 3.50 17.13 $21.13 Jeweled 10.00 7.00 48.91 $65.91

MJC Revised 6/2013

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Unit Cost Under ABC Costing Method

Systematic Instructions 1. Create diagram 1 with these headings:

Activity Cost Pools

Cost Drivers

Estimated Overhead

Total Expected Use of Cost Drivers

Expected Use of Cost Drivers per Product Simple Jeweled

The information for this chart will be gathered from the heads of each department. It will include a total estimate of overhead and the expected total use of cost drivers plus a break down per product line. 2. Create diagram 2 with these headings:

Activity Cost Pools

Estimated Overhead

Total Expected Use of Cost Drivers

Cost Per Unit

Copy the information for column 1, 3, and 4 from diagram 1. Now divided the total estimated overhead for each cost pool by the total expected use of cost drivers for that pool to get the cost per unit of overhead. 3. Create Diagram 3 with these headings:
Cost per Unit Total Cost Per Units

Activity Cost Pools

Simple

Copy the information from column 5 of diagram one under simple. Copy the information from column 4 diagrams 2 into the column labeled Cost per Unit. Now multiply the cost per unit times the simple to get the total cost per units for each activity cost pool. Add the Total cost per units column down to get the total overhead for the simple product line. The very last step is to divide the total overhead cost per this product line by the number of units produced to get a per unit overhead cost.

MJC Revised 6/2013

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Unit Cost Under ABC Costing Method

4. Create Diagram 4 with these headings:

Activity Cost Pools

Cost per Unit

Jeweled

Total Cost Per Units

Copy the information from column 6 of diagrams one under jeweled. Copy the information from column 4 diagrams 2 into the column labeled Cost per Unit. Now multiply the cost per unit times the jeweled to get the total cost per units for each activity cost pool. Add the Total cost per units column down to get the total overhead for the jeweled product line. The very last step is to divide the total overhead cost per this product line by the number of units produced to get a per unit overhead cost. 5. Create Diagram 5 with these headings and side column titles:

Simple Direct Material Direct Labor Overhead Total Unit Cost

Jeweled

The information for per unit cost of direct materials and direct labor are Simple (Direct Material .50); Jeweled (Direct Material $10.00); Simple (Direct Labor $3.50); Jeweled (Direct Labor $7.00). The direct material and direct labor cost will be given to you. The Overhead cost per unit will be taken from diagrams 3 and 4. Total the columns for simple and jeweled down to achieve total product cost per unit for each product line.

MJC Revised 6/2013

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