Revising a time driven ABC system, cost increases, and process changes Refer to the time driven ABC analysis of the Madison Dairy ice cream plant example in the chapter.
Required
(a) Suppose indirect labor costs have increased by 10% from the original setting but all other information remains the same. Determine the total time driven activity based costs assigned to each of the four products (flavors) after incorporating the 10% increase in indirect labor costs and prepare an income statement similar to that shown in Exhibit 5 5.
(b) Suppose that in addition to the change in part a, the unit time for scheduling a production run decreased from four hours per run to three hours per run. Determine the new total time driven activity based costs assigned to each of the four products (flavors) and prepare an income statement also showing the total cost of unused capacity.