Question

Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located in South London in the UK. Its product line consists of trousers (21%), skirts (23%), dresses (14%), and other (42%). Fleet Street has been using a volume-based rate to assign overhead to each product; the rate it uses is £2.82 per unit produced. The results for the trousers line, using the volume-based approach, are as follows:

Number of units produced		11,000
Price (all figures in £)		31.30
Total revenue		344,300
Direct materials		56,700
Direct labor		189,300
Overhead (volume-based)		31,020
Total product cost		277,020
Non-manufacturing expenses		51,600
Total cost		328,620
Profit margin for trousers		15,680

Recently, Fleet Street conducted a further analysis of the trousers line of product, using ABC. In the study, eight activities were identified, and direct labor was assigned to the activities. The total conversion cost (labor and overhead) for the eight activities, after allocation to the trousers line, is as follows:

Pattern cutting	£	36,710
Grading		31,600
Lay planning		30,800
Sewing		35,100
Finishing		23,600
Inspection		10,400
Boxing up		5,600
Storage		11,200

Required:

Determine the profit margin for trousers using ABC.

Answer 1

ANSWER

Total Revenue		£344,300
Direct Material		(£56,700)
Labor & Overhead cost using ABC :-
Pattern cutting	£36,710
Grading	£31,600
Lay planning	£30,800
Sewing	£35,100
Finishing	£23,600
Inspection	£10,400
Boxing up	£5,600
Storage	£11,200
		(£185,010)
Non Manufacturing Exp		(£51,600)
Profit Margin for Trousers using ABC		£50,990

__________________________________

If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.

*****************THANK YOU*************