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Processing time
a lot of time to be used in scheduling and purchasing activities
The production of new products need longer time to produce and process
Product mix
Required more resources for process the new product
Operation
The overhead rate increased from 200% to 300 % after the new product
launched
Cost Structure
Expenses
Cost Pool
Activities
Product
Indirect Labor
50% of indirect labor involved in scheduling and handling production
40% of indirect labor were due to the physical changeover from one color to
another
10% of indirect labor was used to maintaining records activities
Computer expenses
80% was involved in the production run activity
20% was used to keep record on the four products
Machinery expenses
Machinery, maintenance, energy used to support the daily activity
Indirect labor
$ 20000
Expens
es
Cost
Pool
Indirect labor
+fringe benefit
(IDL)
$28000
10%
40%
50%
Production run
Activity setup
Computer
system
expenses
$ 10000
Computer
System
Expenses
$10000
80%
Machinery
$14000
Fringe Benefit
$16000
Machinery
$14000
Fringe Benefit
(DL)
$8000
20%
Part
administrative
Machine
Support
DL (Fringe
Benefit)
Indirect labor
=$14000 Indirect labor = $11200
Indirect labor
= Machinery = $14000 Fringe Benefit = $8000
Computer expenses=$8000
$2800
= $ 22000
Computer Expenses=
$2000
= $ 4800