5-43:

The graph uses activity-based costing to determine the activities, costs and
profit associated with serving particular customers.
It is to provide insights from customer-profitabilit analysis to management.
Which customers bring benefits to the firm?
What relationship with customers should we invest more in?
Which customers cause loss of profit for the company?
How can we maximize our profit based on our relationship with each customer?
5-50:
1) Traditional costing system use only one cost driver to compute M.O of different activities -> less
accurate than ABC. Because ABC use different cost driver that is suitable for each activity
2) Traditional costing system (k có direct material vì là service firm)
POHR= 342k/5k=68.4$/h
ISS ECS
$45*3100 $45*1900
Direct labor =$139,500 =$85,500
$68.4*3100 $68.4*1900
M.O =$212,040 =$129,960
Total cost $351,540 $215,460
3100*$125 1900*$125
Sales =$387,500 =$237,500
Net income (=sale-
cost) $35,960 $22,040
Net income/sale
Profitability (%) =9.28% 9.28%
3) ABC system
ISS ECS
$45*3100 $45*1900
Direct labor =$139,500 =$85,500
M.O
Staff support
POHR=
$180k/250=$720/h $720*200=$144k $720*50=$36k
In-house
computing
POHR=$136400/44
00=$31/h $80,600 $55,800
Miscellaneous
office charges
POHR=$25600/100
0=$25.6/h $10,240 $15,360
Total M.O cost $234,840 $107,160
Total cost $374,340 $192,660
3100*$125 1900*$125
Sales =$387,500 =$237,500
 Net income $13,160 $44,840
Profitability (%) 3.40% 18.89%
4) He should change his attitude because the profitability distribution using ABC system shows significant
profitability of each service -> so professional of different service should be paid different hourly rate
5) If slightly expand then should only expand E-commerce consulting service because it brings more
profitability. If aggressive expansion then NO
5-51:
1) Disregard the proposed use of robots in the Molding Department because the company use direct labor
hour to calculate its M.O in all department, hence when the company swith to use of robot it will lead to
false calculation of M.O of the Molding Department -> false calculation of the cost of product -> false
calculation of profitability
2) Because the cost driver that the company use for all its plant is direct labor hour so that's the cost driver
it uses for its Molding Department. So when the use of robots in the Molding Department is implemented,
replaced by robots. This means the people working in the this department will be Hence, if the company
keep using its current costing system, the cost driver of direct labor hour doesn’t correlate to the cost
driver of robots -> M.O =0
3) a) Because nothing changes in the Cutting and Finishing Department, so the use of direct
labor hour is still correlate to the cost driver used in these departments
b) They should change its cost driver since the use of robot in the Molding Department
requires machine hours as its cost driver

5-52:

Cost driver Activity cost per

Pool rate quantity Activity cost Production volume unit of product
Machine
setups $2000/setup 5 setup $10,000 1000 $10.00
Machine
handling $2/pound 10,000 pound $20,000 1000 $20

Hazadous
waste control $5/pound 2,000 pound $10,000 1000 $10
Quality
control $75/inspection 10 inspections $750 1000 $0.75

Other
overhead
costs $10/machine hour 500 machine hour $5,000 1000 $5
1) Total overhead cost that should be assigned $45,750
to this agent is
2) The overhead cost per box of testing agent is $45.75
3) Total budgeted overhead cost = $625k, total machine hour = 20k -> POHR=$31.25/h
4) a) The overhead cost would be assigned to the medical-testing agent in total
is $31.25*500=$15,625
b) The overhead cost would be assigned to the medical-testing agent per box
is $15,625/1000=$15.625
5) The two system result in such widely differing costs because the use of each cost driver in ABC costing
is more relate to each activity, while the use of one cost driver in traditional costing is relate to only one
activity and is unrelated to other activities -> the calculation of traditional costing is not accurate compared
to ABC costing. The company should use ABC costing

5-53:

Direct Total cost Unit cost

material $120*100=$12,000 $120
Direct labor $40*100=$4,000 $40
M.O
Machine
setups
POHR= giống
bài 52
Machine $2000*3=$6000 $6000/100=$60
handling
POHR= giống
bài 52 $2*900=$1,800 $1,800/100=$18
Hazadous
waste control
POHR= giống
bài 52
Quality $5*300=$1,500 $15
control
POHR= giống
bài 52 $75*3=$225 $2.25
Other
overhead
costs
POHR= giống
bài 52M.O
Total $10*50=$500 $5
cost $100.25
Total cost $260.25