BU111 Lecture Notes - Lecture 4: Net Income, Direct Labor Cost, Gross Profit
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BU111 Full Course Notes
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4-15 (a) the time-driven abc model will now incorporate a capacity cost rate for computer resources, computed as ,000 divided by the practical capacity computer hours per month. The energy costs of ,000 per month will be added to the ,400 monthly machinery costs, for a new machinery resource cost of ,400 per month, leading to a higher rate per hour. For example, start with the quantity of direct materials and labor hours per gallon produced, and multiply these amounts by the related cost per unit of direct materials and wage rate, respectively. Next, estimate the quantity of indirect labor (for changeovers, scheduling and product maintenance) and machine time (for production runs and setups). These will then be multiplied by the associated capacity cost rates of each indirect resource and added to the direct materials and direct labor costs in order to compute the total cost of producing the new flavor.
