Breeden Accounting Case

Breeden Security, Inc (B)

1)

1. The way it works is first major activities are identified in the process system, next cost pools are created for groups of activities that can be allocated together. Following this cost drivers are identified. The number of cost drivers used varies depending on the balance between accuracy and complexity. Ms. Baer acknowledged four major activities: quality control, fabrication, assembly, and packing & shipping. Then distributed Overhead to different areas using the following cost drivers: Occupancy- square feet, Equipment maintenance-estimated time & parts, Equipment depreciation- book values, Quality control- production activity. She tagged Fabrication, assembly, and packing & shipping as production activities and the total direct labor costs were spread across the three activities.

2.

DL Overhead OH Rate=OH/DL

Fabrication 27500 19000 0.690909091

Assembly 22500 12000 0.533333333

Pack & Ship 6000 21000 3.5

We used the following formula for the Overhead rates budgeted cost/budgeted volume. On the other hand overhead rates for fabrication, assembly, and packing & shipping as illustrated in the table above.

3.

o Parts= total spent divided by the number of units produced; RC1=55000/10000, RC2=32000/5000.

o Supplies= revised profit estimate, previously used flat rate of $1.4=$21000/15000units but was changed to reflect that RC 2 was more complicated and used more supplies

o Fabrication labor= estimated DLH manufacturing product/units produced; RC1=18000/10000, RC2=9500/5000.

o Fabrication overhead= RC1=1.8*.69=1.244, RC2=1.9*.69=1.313

o Assembly labor= estimated direct labor for assembling product/ total units produced; RC1=16000/10000, RC2=6500/5000

o Assembly overhead= RC1= 1.6*.53=.853, RC2=1.3*.853=.693

o Subtotal (unchanged) = per unit variable cost, parts+ supplies+ fabrication labor+ Fabrication OH+ Assembly labor+ Assembly OH

o Pack & ship labor= estimated direct labor for pack & ship/ total...