Essay about Blue Ridge Manufacturing - Cost Accounting

2010 Words Mar 18th, 2016 9 Pages
Assignment II – Blue Ridge Manufacturing

INTRODUCTION:
Blue Ridge Manufacturing produces and sells sport towels in the USA market.
The firm knits all the towels it sells and tracks costs for towel production separately from the cost to customize the towels. Seventy-five percent of its orders include logo design, while the balance are print only and require the payment of a licensee fee for the logo used.
Towels are made in four different sizes: Regular, hand, mid-range and hand.
The normal production cycle for an order of white towels is three days. If a customer wants a colored towel, the basic white towel made by Blue Ridge is sent to a dyeing firm for 3 days more. The company sells its products to 986 different customers,
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ULATION:
Direct Cost:
Towel:

Advanced Management Accounting

1

Assignment II – Blue Ridge Manufacturing



Material (Large) = ($0.6 * 27250) + ($0.05 * 36640) + ($0.39 *
35880) + ($0.67 * 480) = $32,497



Labor (Large) = ($0.37 * 27250) + ($0.33 * 36640) + ($0.31 *
35880) + ($0.48 * 480) = $33,527



Overhead (Large) = ($0.22 * 27250) + ($0.2 * 36640) + ($0.19 *
35880) + ($0.29 * 480) = $20,279



Total = $32,497 + $33,527 + $20,279 = $86,303

Customizing:


Cost (Large) = $0.11 * 20,536 = $2,259



Material (Large) = {$0.003 * 2 * (27250 + 36640 + 35880 + 480)}
+ ($0.0026 * 5959) = $617



Labor (Large) = {$0.0045 * 2 * (27250 + 36640 + 35880 + 480)} +
($0.175 * 5959) = $1,945



Overhead (Large) = {$0.0742 * 2 * (27250 + 36640 + 35880 +
480)} + ($1.0994 * 5959) = $21,428



Total = $2,259 + $617 + $1,945 + $21,428 = $26,249

Total Direct Cost (Large) = $86,303 + $26,249 = $112,552
Indirect Cost:
First of all we re-calculated table 4A to obtain the dollar value of reassignation of the administrative and selling cost into various functions within the selling and marketing areas:
Reassign to Customer
Shipping Sales Marketing
Related Activities
Entering Purchase Orders
$85,360
Commission
$15,520
Shipping Activities
$21,125
Invoicing
Cost to Make Sale Calls
$46,560
Checking Credit
Sampels, Catalogue, Info
$1,625
$2,970
Special Handling Charge
$1,625
Distribution Management
$3,250
$2,970

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