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Greetings Assignment

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Submitted By kaydin578
Words 726
Pages 3
5/4/2015
5/4/2015
Misty Mitchell, Derek Cowan, and Katherine Miles
Accounting 203 Jim Stanley
Misty Mitchell, Derek Cowan, and Katherine Miles
Accounting 203 Jim Stanley
Greetings Inc. Greetings Inc.

1. Wall Décor should use the ABC (Activity-Based Costing) system because there is some significant difference between their framed and unframed products. Each of the four activities Wall Décor produces and sells have different profits and costing. With the Activity-Based Costing they can charge different prices and show how each activity is doing financially. 2. Compute the activity overhead rates for each activity:
Activity 1) 91,700/131,000 = .70
Activity 2) 129,000/125,000 = 1.03
Activity 3) 123,900/59,000 = 2.1
Activity 4) 375,200/260,000 = 1.44 3. Product costs for each: a) Lance Armstrong unframed print. b) John Elway print in steel frame, no mat. c) Lambeau Field print in wood frame with mat. 4. In case 1 for Greetings, the overhead allocations using a traditional volume-based approach were $3.36 for Lance Armstrong, $4.48 for John Elway, and $5.60 for Lambeau Field. The total product costs from case 1 were Lance Armstrong $17.36, John Elway $33.48, and Lambeau Field $48.10. The overhead allocation rate for unframed prints, such as the unframed Lance Armstrong print in question 3, decreased under the ABC compared to the amount of overhead that was allocated under the traditional approach in case 1. Why is this the case? What are the potential implications for the company?
The overhead allocation for unframed prints is lower in ABC because of the realization that there is far less labor overhead in relation to the Web Optimization of unframed prints verses the framed prints. This is the reason for the decrease in overhead allocation in the unframed prints. This means that the company will be able to

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