Question: The case presents five potential allocation bases for assigning the company's $300,000 in plant-administration costs. Using the five years of data presented in case Exhibit
The case presents five potential allocation bases for assigning the company's $300,000 in plant-administration costs. Using the five years of data presented in case Exhibit 4, you should hypothesize which potential base would be the best choice.
| Exhibit 4 | ||||||
| Total Amin Cost | Ending Inventory Cost | Plant Personnel | Number of Customers | Total Direct Labor Cost | % of Plant Capacity Used | |
| 2003 | $300,000 | $90,000 | 122 | 1200 | $520,000 | 70.00% |
| 2002 | $295,000 | $83,000 | 122 | 1250 | $515,000 | 75.00% |
| 2001 | $285,000 | $58,000 | 119 | 1100 | $555,000 | 85.00% |
| 2000 | $280,000 | $50,000 | 112 | 800 | $540,000 | 90.00% |
| 1999 | $290,000 | $76,000 | 116 | 600 | $500,000 | 95.00% |
1.Determine the best allocation base for allocating plant-administration costs
2. Calculate the ABC costs for each product on a per-box basis.
3. What do these results tell you about activity-based costing versus costing based on standard volume or direct materials plus direct labor?
4. What changes, if any, should management make to Zauner’s pricing strategy?
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1 The ABC Activity Based Costing is essential as it uses the cost drives in the assigning of the resources towards the existing activities that are defined through the unit cost which is a means of me... View full answer
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