Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located
ID: 2610912 • Letter: F
Question
Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located in South London in the UK. Its product line consists of trousers (25%), skirts (33%), dresses (14%), and other (28%). Fleet Street Inc. has been using a volume-based rate to assign overhead to each product; the rate it uses is £2.61 per unit produced. The results for the trousers line, using the volume-based approach, are as follows:
17,860
Recently, it has conducted a further analysis of the trousers line of product, using ABC. In the study, eight activities were identified, and direct labor was assigned to the activities. The total conversion cost (labor and overhead) for the eight activities, after allocation to the trousers line, is as follows:
Storage
12,200
Determine the profit margin for trousers using ABC. Please show all calculations step by step
Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located in South London in the UK. Its product line consists of trousers (25%), skirts (33%), dresses (14%), and other (28%). Fleet Street Inc. has been using a volume-based rate to assign overhead to each product; the rate it uses is £2.61 per unit produced. The results for the trousers line, using the volume-based approach, are as follows:
Number of units produced 13,000 Price (all figures in £) 29.23 Total revenue 379,990 Direct materials 62,500 Direct labor 208,600 Overhead (volume-based) 33,930 Total product cost 305,030 Nonmanufacturing expenses 57,100 Total cost 362,130 Profit margin for trousers17,860
Explanation / Answer
Product Margin statement Units Rate Amount Sales Revenue 13,000 29.23 379,990 Less: Product Cost Direct Material 62,500 Conversion Cost* 198,370 Total Product Cost (ABC) 260,870 Gross Margin 119,120 Less: Non manufacturing expenses 57,100 Profit margin for trousers £ 62,020.00 Pattern cutting £ 39,470 Grading 33,700 Lay planning 32,800 Sewing 37,800 Finishing 25,000 Inspection 11,300 Boxing up 6,100 Storage 12,200 Total Conversion Cost* 198,370
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