EXHIBIT- Overhead Transactions Workload
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Products
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A
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B
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C
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Receiving orders:
Receive each component once per run (a "just-in- time" inventory policy)
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5 (4%)
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18 (15%)
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100 (81%)
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Packing orders:
One packing order per shipment
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1 (4%)
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5 (19%)
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20 (77%)
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Engineering Workload:
Distribution of workload in the engineering department is based on subjective assessment of long-run trends in number of engineering work orders for each product
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25%[The standard, smooth
running product]
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35%
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40%[The complex, special problems product]
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QUESTIONS
1. Using the information given in Exhibit, calculate transaction-based indirect overhead cost (receiving, engineering, and packing) per unit for each of the three products. Use this new information to recalculate overall cost per unit for products A, B, and C.
2. How can Ajax use the transaction costing data to improve programming decisions? Specifically consider:
- Product pricing.
- Product emphasis.
- Most likely cause of the decline, over time, in control over overhead spending as the product mix has shifted away from product B and toward product C.