1.
A/B.
Buffalo Ale:
A.
Direct Materials: 62.80
Direct Labor: 108.00
Labor Hours: 18 Hours
18 x 15.57 = 280.26
Cases Created: 22 x 24 (Quantity of Bottles/Case) = 528
Total Cost Per Batch: $451.06
Cost Per Bottle = 451.06/528 = $0.85/Bottle
B.
Direct Materials: 62.80
Direct Labor: 108.00
Fermentation Days: 13.06 x 3 = 39.18
Direct Labor Hours: 1 x 18 = 18
Machine Hours: 0.07 x 110 = 7.7
Number of Orders: 8.36 x 2 = 16.71
Quality Control Inspections: 5 x 2.16 = 10.8
Bottles Produced: .10 x 528 = 52.8
Total Cost Per Batch: $315.99
Cost per Bottle: $0.60
Bismark Bock:
A.
Direct Materials: 88.95
Direct Labor: 72.00
Labor Hours: 12 Hours
12 x 15.57 = 186.84
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Buffalo Ale:
1.05 Per Bottle x 528 = $554.40 (Selling Price Per Batch)
Labor Allocation: 554.40 - 451.06 = 103.34 GM
GM Percentage: 103.34/554.40 = 18.64%
ABC Method: 554.40 - 315.09 = 239.41 GM
GM Percentage: 239.41/554.40 = 43.18%
Bismark Bock:
1.50 Per Bottle x 384 = 576.00 (Selling Price Per Batch)
Labor Allocation: 576.00 – 347.79 = 228.21
GM Percentage: 39.62%
ABC Method: 576.00 – 614.94 = (38.94)
GM Percentage: (6.76%)
Four Heads Stout:
1.40 Per Bottle x 432 = 604.8
Labor Allocation: 604.8 – 369.96 = 207.84
GM Percentage: 34.37%
ABC Method: 604.8 – 377.96 = 226.84
GM Percentage: 37.5%
3.
Both systems have their advantages and disadvantages, the labor-based allocation method provides a fast straightforward method for businesses with labor intensive processes that in many businesses make up the majority of these costs. For this microbrewery however, especially within overheads the percentage of costs labor attributes towards is relatively minimal. Therefore reducing the effectiveness of such a method. ABC however represents a more in depth look at cost allocation and within such a business where there are a huge variety of factors involved looking at a more segmented form of activity based cost allocation is extremely important.
4.
On a general level product margins look to be fairly strong, however when we take a closer look at the ABC costing method used for the beer label Bismark
The gross margin and gross margin percentage under allocation based on direct-labor hours for Buffalo Ale, Bismark Bock and Four Heads Stout is $103.54 and 19%, $228.21 and 40% and $234.84 and 39%, respectively. The gross
Under an ABC system, the allocation of costs to products is achieved through at least four analytical steps. Firstly, costs are grouped into activity levels. Secondly, cost drivers are
|Price of Belgium cocoa beans|Quantity of Belgium cocoa beans |Quantity of Belgium cocoa beans |Total Demanded |
3. Briefly describe how the current production cost assignment system works. What are the consumption ratios (activity percentages) for assigning manufacturing overhead to each product at present?
The following is an analysis of the case, Greaves Brewery: Bottle Replenishment. It details the growing beer operation of Greaves Brewery located in the Caribbean island of Trinidad. The purchasing manager for the company, Alex Benson, is uncertain about how many bottles to order from the company’s German glass supplier. His decision is complicated by the possibility of a new bottle design being introduced that would compromise his existing inventory of bottles. Additionally, he is faced with storage limitations and erratic sales, all of which are impacting his decision. He is also concerned about over ordering to avoid issues from an off year, impact from
To perform a break-even analysis, we have made the following assumptions: (a) retail margin= 60%, (b) the additional fixed cost of production per flavor, including advertising, bottling run and sundries, is $10 million and this is assumed to be an annual cost, except the bottling run, (c) a conservative estimate of percentage share of market figure is derived by multiplying the market segment percentages, as well as the age segment percentage for the category > 40 yrs. The percentage = 74% x 62% x 85% x 40% = 16%. We first determine the retail
If we compare the old job costing method with the Activity based costing method we can see in the table below that the activity base rate gives us a much more accurate insight in allocating the manufacturing overhead costs. In fact, the activity based overhead calculation shows us that the activity rates for Valves and Pumps are lower than the rates used in plantwide production rates, but the activity based rate for Flow Controllers is around 50% higher than the cost calculated in the job costing method. The reason for this difference in our opinion can be traced back to the high receiving and production control costs as well as packaging &
• This cost method does not provide the best system for JDCW’s cost allocation. By using only three overhead rates the present system grossly undermines the true production costs since other activities of the production process are not acknowledged.
Brand plays a key role in the beer-purchasing process, along with taste, price, special occasion,
The Gross profit margin stays relatively constant at around 36 %. However, there is a slight rise from 2000 to 2004.
Overhead costs are not in proportion to the production output because of the method they are using. This leads to inaccurate pricing and costing decisions. An Activity Based Costing System would help find the real relationship between the products produced and overhead.
But as the company grows, they will have to let go of this structure and culture. Even Peter wonders if this structure is suitable if the company will grow in the future. SOLUTION: By growing as a corporation in the future, the company should and will hire more and more employees, and as the personnel increases in number, the organizational structure and the culture will change.
14-26 (Analytical procedures) the following data was taken from the production and accounting records for Casuccio Manufacturing, Inc.
The Problem(s). Manson and Associates was doing a research to determine market potential of a Coors beer distributorship for a two-county area in southern Delaware on behalf of Larry Brownlow so Larry could find the answer for the following question:
In addition to selling beer in bottles and cans, the distributorship will also sell kegs (contribution margin of 1/3 of beer in bottles and cans). The case states (p. 280) that keg beer prices at the wholesale level were about 45% of prices for beer in bottles and cans. These two facts can be combined with wholesale costs and prices for beer in bottles and cans to produce an overall weighted average contribution.