Accounting Case Study 2 Essay

Submitted By csocarras
Words: 403
Pages: 2

Question 1:

Buffalo Ale
Bismarck Bock
Direct Materials \$62.60 \$88.95 \$89.55
Direct Labor Cost \$108.00 \$72.00 \$78.00
Direct Labor Hours
18 Hours
12 Hours
13 Hours
Manufacturing Overhead Cost (POHR * DLH) \$280.26 \$186.84 \$202.41
Total Cost (DM + DL + MOH) \$450.86 \$347.79 \$369.96
Total Bottles
528
384
432
Cost Per Bottle (Total Cost/Total Bottles) \$0.85 \$0.91 \$0.86

Selling Price Per Bottle \$1.05 \$1.50 \$1.40
Gross Margin (Selling Price Per Bottle-Cost Per Bottle) \$0.20 \$0.59 \$0.54
Gross Margin Percentage (Gross Margin/Selling Price)
19%
40%
39%

Looking at the gross margin percentage in order to rank probability, we see that Bismarck (40%) is the most profitable, followed by Four Heads Stout (39%), and lastly, Buffalo Ale (19%) is the least profitable.

Question 2:

Activity
Total Activity Volume
Estimated Cost
Activity Rate (Estimated Cost/Total Activity Volume)
Fermentation Days 2,910 \$38,000 \$13.06
Direct Labor Hours 7,500 \$7,500 \$1.00
Machine Hours 82,700 \$5,500 \$0.07
Number of Orders 3,740 \$31,250 \$8.36
Number of Quality Control Inspections 4,850 \$10,500 \$2.16
Number of Bottles Produced 229,920 \$24,000 \$0.10

Activity Cost Pool

Buffalo Ale
Bismarck Bock

Activity Rate
Activity Volume
Assigned Cost (Activity Rate*Activity Volume)
Activity Volume
Assigned Cost
Activity Volume
Assigned Cost
Fermentation Days
13.06
3
\$39.18
14
\$182.84
4
\$52.24
Direct Labor Hours
1
18
\$18.00
12
\$12.00
13
\$13.00
Machine Hours
0.07
110
\$7.70
325
\$22.75
135
\$9.45
Number of Orders
8.36
2
\$16.72
18
\$150.48
9
\$75.24
Number of Quality Control Inspections
2.16
5
\$10.80
22
\$47.52
8
\$17.28
Number of Bottles Produced
0.1
528
\$52.80
384
\$38.40
432
\$43.20
Total MOH Cost

\$145.20

\$453.99

\$210.41

Direct Material Cost

\$62.60

\$88.95

\$89.55
Direct Labor Cost

\$108.00

\$72.00

\$78.00
Total Cost

\$315.80

\$614.94

\$377.96
Number of Bottles

528 384 432
Total Cost Per Bottle

\$0.60

\$1.60

\$0.87

Selling Price

\$1.05

\$1.50

\$1.40
Gross Margin (Selling Price-Total Cost)

\$0.45

-\$0.10

\$0.53
Gross Margin Percentage (Gross Margin/Selling Price)

43%

-7%

38%

Based on the activity based cost system, looking at each Gross Margin Percentage, Buffalo Ale is the most profitable (43%), second is Four Head Scouts with (38%), and lastly, Bismarck Bock with a gross margin percentage of (-7%).

Question 3:

ABC Method: