2Team Assignment, Part 1Mr. Beridon, it is highly recommended that you reframe from discontinuing any of your services at this time before Team B is allowed to conduct an analysis that could benefit your final decision. Within this request, Team B will explain how an Activity Based Costing (ABC) system could help in keeping both sod and trees as part of your business. Once the ABC tool is conducted, you will be able to see your potential benefits in the long run and prevent any loss in a quick business decision manner. Covering all activities, activity cost pool and cost driver that are allocated to your overhead costs can be reviewed through using the ABC System and creating a two stage process based on sod and trees that you wish to plant and sell.Potential Benefits Gained Using ABC SystemThere are a lot of potential benefits that Mr. Beridon's business can benefit from using activity-based costing. As a business that is set up to provide customized products and services, the use of having activity based costing is crucial to the business. Although implementing ABC can be a challenging task for any business, it offers a more accurate report compared to the traditional cost. With ABC Mr. Beridon can re-analyze the true cost for each item so he can place better prices that produce equal revenue. The ABC system distributes indirect cost based on a product's cost. ABC can be used to identify non-valued future costs and can help to better assign supplies to resourceful and beneficial activities.
E2-6 a) 1) The assigned source documents assigned to this job are Direct Labor - Time Tickets; Direct Materials - Materials Requisition Slip;, and Manufacturing Overhead - Predetermined Overhead Rate. 2) Predetermined manufacturing overhead rate = 120% of direct labor cost. 3) Direct Labor 1,360 Direct Materials 4,828 Manufacturing Overhead 1,632 Total 7,820 Unit Cost 3.91 b) Inventory: Finished Goods 7,820 Inventory: Work in Process 7,820 E2-9 a) YELLOW KNIFE MANUFACTURING COMPANY Schedule for Cost of Goods Manufactured For the Month Ended May 31, 2005 May 1: Work in Process 14,700 Used Direct Materials 62,400 Direct Labor 32,000 Manufacturing Overhead 48,000 Total Manufacturing Cost 142,400 Total Work in Process Cost 157,100 May 31: Work in Process (17,900) Manufactured Cost of Goods 139,200 b) YELLOW KNIFE MANUFACTURING COMPANY Income Statement For the Month Ended May 31, 2005 Sales 200,000 Cost of Goods Sold May 1: Finished Goods 12,600 Manufactured Cost of Goods 139,200 Cost of Goods Available for Purchase 151,800 May 31: Finished Goods 11,500 Sold Cost of Goods 140,300 Gross Profit 59,700 c) The manufacturing inventories will be reported as Current Assets in the May 31 Balance Sheet. These inventories are: Finished Goods: $11500 Raw Materials: $7100 Work in Process: $17900