Product Data
			Model A		Model B
Units produced & sold per year			50,000		500,000
Sales Revenue			$1,750,000.00		$17,500,000.00
Prime Cost			$125,000.00		$1,250,000.00
# of Direct Labor Hours			125,000		475,000
# of Machine hours			50,000		450,000
# of Set Ups			25		100
# of Inspection runs			200		1,800
# of packing orders			12,000		68,000
Manufacturing Overhead Costs:
Machining	$150,000.00
Setup costs	$280,000.00
Inspection costs	$180,000.00
Packing Costs	$260,000.00
Total	$870,000.00
Simple or Traditional Cost Allocation			Model A		Model B
Plant-wide MOH Rate
Allocated MOH
Direct Materials & Direct Labor
Allocated MOH
Total Product Costs
Product Cost (CGS) per unit
Selling Price per unit
CGS per unit
Gross Profit per Unit
Activity-Based Costing			Model A		Model B
	Activity Rates
Machining
Setup costs
Inspection costs
Packing Costs
Allocated MOH
Direct Materials & Direct Labor
Allocated MOH
Total Product Costs
Product Cost (CGS) per unit
Selling Price per unit
CGS per unit
Gross Profit per Unit
Departmental MOH Rates:	$0.42		$1.10
	Department 1 Fabrication		Department 2 Assembly
	Machine Hours		Direct Labor Hours
Model A	100,000		225,000
Model B	400,000		375,000
Departmental OH Allocation			Model A		Model B
Direct Materials & Direct Labor
Allocated MOH Dept 1
Allocated MOH Dept 2
Total Product Costs
Product Cost (CGS) per unit
Selling Price per unit
CGS per unit
Gross Profit per Unit
Compare the results for the simple cost allocation system (plant-wide) with that of
an ABC system.
	Plant wide		Departmental		Activity Based
Model A
Selling Price per unit
CGS per unit
Gross Profit per Unit
Model B
Selling Price per unit
CGS per unit
Gross Profit per Unit
Which do you think is more accurate and why?
What circumstances would favor Ramsey adopting ABC as their allocation method?
Do you think Ramsey should adopt ABC as their allocation method? Why or why not?