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C071 Contract account 071 Contract

Revenue121,675
Direct margin31,654
Activity cost24,407
ABC profit7,247 (6.0%)
Traditional profit-6,291

hidden winner Traditional costing assigns 37,945 of overhead from 1,357 labour hours; ABC assigns 24,407.

Profit waterfall

025,00050,00075,000100,000125,000 Revenue: 121,675 121,675 RevenueDirect cost: -90,021 -90,021 Direct costDirect margin: 31,654 31,654 Direct marginMachine run: -5,898 -5,898 Machine runHand assembly: -4,148 -4,148 Hand assemblySetups: -3,495 -3,495 SetupsQuality inspection: -3,278 -3,278 Quality inspectionPallet handling: -2,732 -2,732 Pallet handlingDelivery: -1,825 -1,825 DeliveryOther activities: -3,031 -3,031 Other activitiesProfit: 7,247 7,247 Profit

Activity costs

ActivityCostShare
Machine run5,89824%
Hand assembly4,14817%
Setups3,49514%
Quality inspection3,27813%
Pallet handling2,73211%
Delivery1,8257%
Customer support1,7987%
Order processing9514%
Credit and collections1491%
Engineering changes1331%
Returns handling00%