Arctic Insultion Case Study - Rashik Gupta 3g2za

Case Artic Ins Data Given

Direct Labor Direct Overhead Indirect Labor Repair Labor Repair Materials Supplies Power Other Total Allocated Divisional Overhead Total Formed Bales Processed Purchased Bales Processes Total

Calculations

Formed Bales

Given Calculated

Purchased

Given Calculated

1979

Formed Bales Processed

Total Number 1,075,000.00

Purchased Bales Processed Total

Arctic Insulation Summary 1

Formed Bales Direct Labor Depot Over Head Division Overhead Total Increase 1980 vs 1979 Purchsed Bales Direct Labor Depot Over Head Division Overhead Total Increase 1980 vs 1979

Arctic Insulation Summary 2

Formed Bales Direct Labor Depot Over Head Division Overhead Total Increase 1980 vs 1979

280,000.00

Purchsed Bales Direct Labor Depot Over Head Division Overhead Total Increase 1980 vs 1979

Question Number 1 Are unit costs per bale rising or falling betweeen 1979 or 1980? your answer with t The unit cost per bale is falling between 1979 or 1980. The result can be ed by the

In Arctic Insulation Summary 1 table, the cost per Bale is increasing, but the cost is not eve hour in Purchase method is more than the number of bales processed in Formed method, b

In Arctic Insulatio nSummary 2 table, the cost per bale is calculated on the basis of the num calculation. And in this table, the cost per bales has been reducing by $1.04 from 1979 to 1

Question Number 2 What inferences do you draw regarding the cost control issue which is of concern to the pre As we can see the total number of bales in 1979 were 1355000 and that in 1980 were 1650 be easily deduced that the organization has achieved better position in cost by processing This could be achieved by reducing the propotion of investement in Formed method and in method is much more than the number of bales processed per hour in Formed method. Hen And the total cost per unit has significantly reduced by $1.04 per bale from 1979 to 1980.

Question Number 3 Whar recommendation would you make regarding Summary Cost Reports for collection and Collection and Baling Costs incur three costs 1. Direct Labor 2. Depot Overhead 3. Divisional Overhead The cost of Raw Material i.e. Paper is not included in the Collection and Baling Costs, instea

According to me calculation method used in Exhibit 2 i.e. on the basis of the number of bal Also as we can see the with the reduction cost of bulk paper and the increase in the propor reduce, we can increase the proportion of the Purchased Bales as compared to Formed Bale Also the cost of abour to precess a bales in Formed case is much high, we can reduce that

1. Direct Labor 2. Depot Overhead 3. Divisional Overhead The cost of Raw Material i.e. Paper is not included in the Collection and Baling Costs, instea

According to me calculation method used in Exhibit 2 i.e. on the basis of the number of bal Also as we can see the with the reduction cost of bulk paper and the increase in the propor reduce, we can increase the proportion of the Purchased Bales as compared to Formed Bale Also the cost of abour to precess a bales in Formed case is much high, we can reduce that

Question Number 4 What other advice do you have for the president? Reducing the costs Marginally from the Overheads, like the labour costs per bale and increa margins

Case Artic Insulation, Rashik Gupta 1979 $

4,296,000.00

$ $ $ $ $ $ $

1,875,000.00 101,000.00 36,000.00 53,000.00 55,000.00 758,320.00 2,878,320.00

67.0%

$

3,522,710.00

82.0%

$

10,697,030.00 1,075,000.00 280,000.00 1,355,000.00

Total Number 2.5 $ 1 $ 16 $ 1 $

79.3% 20.7% 100.00%

Cost 9.50 3.80 9.50 0.59

1979 Bales Processed Per hour 2.5

1980 Total Hours 430,000.00

Total Number 792,000.00

16

17,500.00 447,500.00

1979 $

Cost per Bale

$

4,128,000.00

$

2,765,760.00

$

2.57

$ $

3,384,950.39 10,278,710.39

$ $

3.15 9.56

$

$3.84 calculated above

Cost Per Bale

$

168,000.00

0.60 calculated above

$

112,560.00

$

0.40

$ $

137,760 418,320

$ $

0.49 1.49

1979 $

Cost per Bale

$

4,128,000.00

$3.84 calculated above

$

2,283,538

$

2.12

$ $

2,794,770 9,206,307.93

$ $

2.60 8.56

858,000.00

$

Cost Per Bale

$

168,000.00

0.60 calculated above

$

594,781.99

$

2.12

$ $

727,940 1,490,722

$ $

2.60 5.32

en 1979 or 1980? your answer with the relevant cost calculations or 1980. The result can be ed by the figures represented in Arctic Insulation Summary 2 table above.

per Bale is increasing, but the cost is not evenly distributed among the Formed and Purchased method. As the n mber of bales processed in Formed method, but the cost is calculated on hour basis.

per bale is calculated on the basis of the number of bales processed by a particular method. hence this is the m es has been reducing by $1.04 from 1979 to 1980, hence the cost per bale is falling.

st control issue which is of concern to the president? How well were the costs controlles in 1980? 79 were 1355000 and that in 1980 were 1650000. Also the total cost in 1979 were $10697040 while that in 198 chieved better position in cost by processing more number of bales in lesser cost. tion of investement in Formed method and increasing the proportion in Purchased method because the number es processed per hour in Formed method. Hence the organization has been able to redice the costs.

duced by $1.04 per bale from 1979 to 1980.

ding Summary Cost Reports for collection and baling depots

ded in the Collection and Baling Costs, instead it is assigned to the shredding and bagging plants.

xhibit 2 i.e. on the basis of the number of bales processed per hour is the more appropriate way to calculate the t of bulk paper and the increase in the proportion of the Purchased Paper, the costs per bale reduced. If the price Purchased Bales as compared to Formed Bales rmed case is much high, we can reduce that cost by comparing it with what market has been offering

ent? eads, like the labour costs per bale and increasing the number of Purchased Bales in proportion to Formed Bales

ashik Gupta 1980 $

3,556,080.00

$ $ $ $ $ $ $

2,019,000.00 97,000.00 43,000.00 46,000.00 59,000.00 651,990.00 2,915,990.00

82.0%

$

3,164,900.00

89.0%

$

9,636,970.00 792,000.00 858,000.00 1,650,000.00

Formed Per Bale Cosst

$3.84 Approx.

Purchased per Bale Cost

$0.60 Approx.

1980 Bales Processed Per hour 2.50

48.0% 52.0% 100.0%

Total Hours 316,800.00

16

53,625.00 370,425.00

1980 $

Cost per Bale

$

3,041,280.00

$

2,493,853.36

$

3.15

$ $

2,706,729.62 8,241,862.98

$ $ $

3.42 10.41 0.84

$

$3.84 calculated above

Cost Per Bale

$

514,800

0.60 calculated above

$

422,137

$

0.49

$ $

458,170 1,395,107.02

$ $ $

0.53 1.63 0.13

1980 $

Cost per Bale

$

3,041,280.00

$3.84 calculated above

$

1,399,675

$

1.77

$

1,519,152

$ $ $

1.92 7.53 1.04

$

Cost Per Bale

$

514,800

0.60 calculated above

$

1,516,314.80

$

1.77

$ $

1,645,748 3,676,863

$ $ $

1.92 4.29 1.04

ulation Summary 2 table above.

ed and Purchased method. As the number of bales processed per r basis.

rticular method. hence this is the most appropriate method of cost falling.

s controlles in 1980? were $10697040 while that in 1980 was $9636970 hence it can cost. ased method because the number of bales processed in Purchase ble to redice the costs.

g and bagging plants.

re appropriate way to calculate the per bale cost. e costs per bale reduced. If the prices remain stagnant or further

market has been offering

Bales in proportion to Formed Bales would increase the profit