Name: Fahad Athar

Course: Accounting For Decision Making

ERP ID: 10566
Main Campus, MBA II
Date: February 11, 2016

Case Solution: Colorscope Inc.

Problems Faced:

Development in technology
Increasing competition from large printing companies, national pre-press
houses, and stand-alone firms.
Companies achieving economies of scale hence decrease in prices per page.
Amount of rework

The Pre-Press Production Process

Job
Scanni
Assem
Outp
Quality
Preparatio
ng
bly
ut
Control
n
In this case, we have to perform a two stage cost allocation process. In the first
stage, we would have to allocate overhead to the cost pool which in this case are
the five stages of the production process. In second stage, we are going to
allocate cost overhead from these pools to the jobs in each stage of the
production.
Description
Wages
Depreciation
Rent
Others
Total
Overhead
Labor Hours
from Exhibit 9
Overhead
Rate per labor
hour
Floor Space in
Square Feet

Job
Preparat
ion
$
8,000

Scanni
ng

Assem
bly

Outpu
t

Quality
Control

$
2,000
$
25,000
$
2,000
$
5,246
$
64,246

$
64,000
$
10,000
$
8,000
$
10,492
$
92,492

$
10,000
$
14,000
$
4,000
$
1,639
$
29,639

$
11,000
$
500
$
1,000
$
1,311
$
13,811

1280

200

160

2440

6.56%

640
26.23
%

52.46%

8.20%

6.56%

100.00%

$ 74

$
100

72

$
148

$
86

1,000

1,000

4,000

2,000

500

6.67%

6.67%

26.67%

13.33%

3.33%

$
500
$
2,000
$
1,311
$
11,811
160

Idle

Total

$13,0
00

$
125,000
$
50,000
$
30,000
$
20,000
$
225,000

$13,0
00

6,500
43.33
%

15,000
100%

Recommendations

Upgrade their technology

Update policies regarding rework
Colorscope would have to do quality-cost trade off.