# Abc Case Essay

468 Words2 Pages
1. a. The cost related to processing (i.e., warehousing) a carton through the facility \$54 (\$4,320,000/80,000) b. The cost of entering an electronic and a manual customer order 840,000/(16*1500*60)=.5833333 \$/productive minute \$3.50 for an electronic (.5833333*6) \$5.25 + 2.625*(number of lines in order) was the cost of a manual (\$0.5833333*9)+(\$0.5833333*4.5)*number of lines per order c. The cost of shipping a carton on commercial carriers \$6 per carton (\$450000/75000) d. The cost per hour for desktop deliveries. (200000+250000)/(4*1500) = \$75/hour * What are the advantages of using the per hour cost driver vs. other potential drivers such as cost/carton or cost per delivery? Variation in shipping costs relates to costs associated with shipping time (i.e. fuel costs, truck maintenance, drivers’ salaries), but does not correspond to cartons transported or deliveries made 2. Using this cost driver information, calculate the cost and profitability of the five orders in the Exhibit 2.1 Order | 1 | 2 | 3 | 4 | 5 | Price | \$610.00 | \$634.00 | \$6,100.00 | \$6,340.00 | \$6,100.00 | Acquisition Cost | \$(500.00) | \$(500.00) | \$(5,000.00) | \$(5,000.00) | \$(5,000.00) | Warehousing Cost | \$(54.00) | \$(54.00) | \$(540.00) | \$(540.00) | \$(540.00) | Commercial Shipping Cost | \$(6.00) | \$- | \$(60.00) | \$- | \$(60.00) | Desktop Shipping Cost | \$- | \$(300.00) | \$- | \$(300.00) | \$- | Order Entry costs | \$(3.50) | \$(7.88) | \$(3.50) | \$(31.55) | \$(31.55) | Profit | \$46.50 | \$(227.88) | \$496.50 | \$468.45 | \$468.45 | 3. Briefly explain the difference in profitability of the five orders calculated by the ABC system. All orders share the same warehousing and acquisition cost per carton, so any variation in these factors is immaterial to a difference in profitability. Therefore, any