South Dakota Microbrewery Case

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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
…show more content…
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

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