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P004 Classic Sofa 1

Revenue1,434,460
Direct margin518,181
Activity cost182,932
ABC profit335,249 (23.4%)
Traditional profit201,356

over-charged Traditional costing assigns 316,825 of overhead from 11,328 labour hours; ABC assigns 182,932.

Profit waterfall

0500,0001,000,0001,500,000 Revenue: 1,434,460 1,434,460 RevenueDirect cost: -916,279 -916,279 Direct costDirect margin: 518,181 518,181 Direct marginMachine run: -68,147 -68,147 Machine runSetups: -41,923 -41,923 SetupsQuality inspection: -38,231 -38,231 Quality inspectionHand assembly: -34,631 -34,631 Hand assemblyProfit: 335,249 335,249 Profit

Activity costs

ActivityCostShare
Machine run68,14737%
Setups41,92323%
Quality inspection38,23121%
Hand assembly34,63119%