Develop an ABC Costing System for Classic Pen Co. using the information provided in the case and the requirements below.
Required:
1. Identify the appropriate activity cost pools and cost drivers (hint: there should be four).
2. Identify the appropriate portions of the $60,000 "Support Expenses" to be aligned with each of the identified activity cost pools. (hint: some of this $60,000 is now going to be "attached" to direct labor as additional direct cost, causing the total amount distributed among the activity cost pools to be less than $60,000).
3. Calculate the activity cost rates for each of the activity cost pools.
4. Calculate the amount of "Support Expenses" to be allocated to each of the four product lines for each activity.
5. Calculate the operating income for each product line within this ABC costing environment. Which product lines were being undercosted under the old simple costing system? Which product lines were being overcosted?
Detail your answers to each of the above requirements within a single Microsoft Excel worksheet, using a logical and coherent presentation of all calculations and results (presentation, readability, and logical flow of worksheet will be considered as part of the grade on this assignment). Please use formulas in all cells where calculations are present, using cell references for inputs where applicable. You should be detailing the inputs of all calculations within your worksheet prior to representing the calculation result. For example, if you're calculating the activity cost rate of the [insert generic activity cost pool name here] cost pool:
Instead of:
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[Generic] cost pool activity cost rate:
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50%
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Show:
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Generic cost pool:
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$100,000
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/
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$200,000
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=
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50%
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