ACCT452 Advanced Managerial Accounting Case study ABM Andrews Please check that

Question

ACCT452 Advanced Managerial Accounting

Case study ABM Andrews

Please check that the conversion costs of $1.271 million attributed to galvanised pallet nails for the financial year 1996/97 (see table 2 of the case study) are correct. To do this please prepare a spreadsheet in which you use the information in exhibits 4, 5, and 6 to produce an ABC analysis for 1996/97 for galvanised pallet nails.

For example, the costs of the cleaning cost pool in 1996/97 were $222,000. The activity volume of this cost pool was 110,000 tons. The cleaning cost per 1 ton was therefore 222,000/110,000=$2.01818. How much ABC cost is attributable to galvanised pallet nails? Exhibit 5 says they produced 2817 tons of galvanised pallet nails. Hence the ABC cost for galvanised pallet nails is 2817*2.01818=$5,685.21.

Use this way of working through all the cost pools to determine the total 1996/97 ABC conversion cost for galvanised pallet nails. You know the total should be $1.271 million according to table 2. If it is not the same then maybe the accountants at Andrews made a mistake….?

Table 2 1995-96 1.950 2600 Sales ($M) Sales in Tons Material Costs ($M) Converslon Costs ($M) Net Profits($M) 996-97 2.100 2817 1.100 1.271 (.271) 0.900 0.859 0.191

Explanation / Answer

Cost Pool 1996-97 Spending 1996-97 Driver Volume Rate 1996-97 Units of Driver Consumed 1996-97 ABC Conversion Cost Cleaning house 222000 110000 2.01818 2817 5685.22 Depreciation-Wire drawing machine 420000 110000 3.81818 2817 10755.82 Depreciation-Nail galvanizer 623000 45000 13.84444 2817 38999.80 Depreciation-Heading and threading machine 140000 2817 49.69826 2817 140000.00 Material handling 350000 4500 77.77778 21 1633.33 Dies retooling 382000 3300 115.75758 13 1504.85 Wire drawing changeovers 272000 700 388.57143 2 777.14 Quality inspection 420000 1000 420.00000 4 1680.00 Order processing 143000 3000 47.66667 9 429.00 Invoicing 92000 3000 30.66667 9 276.00 Information systems 1330000 110000 12.09091 2817 34060.09 Pricing and advertising 9000 Labor 600000 Freight 31000 Inventory EVA @ 18% 18000 Equipment EVA @ 18% 376800 Total 1996-97 ABC Conversion Cost $ 1270601.25 Total 1996-97 ABC Conversion Cost ($ in million) 1.271

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.