ZAUNER ORNAMENTS
1. Determine the best base for allocating plant-administration costs
Yu started to think about costing on volume basis and then o a direct labour/direct material basis. In both cases the analysis did not seem to confident cause of the missing data on employed people working on the plant. By relating the direct labour cost with the people employed, from the data of the plant administration cost, we can estimate the workers employed per each ornament box.
We are given that the specialty ornaments do have 24 extra people for painting.
Given the total direct labour costs and the number of plant personnel, we can calculate the cost for each person, i.e. $ 520,000.00/122= $ 4,262.29.
By having this data we can estimate the numbers of employees per each product
Basic ornaments 83.200,00 20
Large ornaments 93.600,00 22
Specialty ornaments 102.200,00 24
241.000,00 56
520.000,00 122
Given the plant administration costs related to the people employed we will consider the plant administration and the plant depreciation as a cost driver.
Customers number can not be taken as a reference cause of the non relevant data given by Exhibit 4
2. Calculate the ABC costs for each product on a per box basis
In order to calculate the ABC costs for each product we do have to evaluate the cost drivers and also he value each product is contributing to general turnover.
Boxes $ Total $ RANK
Small &nb ...