Scribd
Upload
599 views1 page

Lehigh Steel Assignment

This document discusses calculating profits for sample products using Activity-Based Costing (ABC) and Theory of Constraints (TOC) accounting methods. It asks the reader to: 1) Compute profits for five products using ABC and TOC methods. 2) Explain the differences between profits calculated using ABC, TOC, and standard costing. 3) Recommend whether Lehigh should base product mix decisions on ABC profits, TOC throughput, or incorporate both methods. 4) Discuss whether Lehigh would have made better decisions during the recession if using the recommended profit estimation method.

Uploaded by

Yanjing Xin
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
599 views1 page

Lehigh Steel Assignment

This document discusses calculating profits for sample products using Activity-Based Costing (ABC) and Theory of Constraints (TOC) accounting methods. It asks the reader to: 1) Compute profits for five products using ABC and TOC methods. 2) Explain the differences between profits calculated using ABC, TOC, and standard costing. 3) Recommend whether Lehigh should base product mix decisions on ABC profits, TOC throughput, or incorporate both methods. 4) Discuss whether Lehigh would have made better decisions during the recession if using the recommended profit estimation method.

Uploaded by

Yanjing Xin
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

Lehigh Steel Assignment 2012 1.

Compute profits for the five sample products under ABC and Theory of Constraints (TOC). The profit that we should attend to according to TOC is throughput = revenue minus materials costs. For ABC, first use the current production volume and number of orders and SKUs from Exhibit 4 to calculate total ABC profits for each product. Then calculate per-unit (=per-pound) profit by dividing total by # of pounds. TOC throughput (= can be calculated entirely on a per-pound basis. Check figures: for Alloy: Condition Round, ABC profit per pound should be about ($0.11), and throughput per pound should be $1.77. 2. Explain briefly, in a way that would be helpful to a non-accountant, why profits are different under each of these methods and the standard-cost method shown in Exhibit 5 of the case. 3. Should Lehigh base its product mix decision on the ABC profits or throughput (TOC) or neither? Is there some (at least approximate) way of incorporating the insights of both ABC and TOC into this decision? 4. Lehigh has only started to think more seriously about product costs since the recession ended. Does this make sense, or would they have made different and betterproductmix decisions during the recession if they had already been using whatever profit estimation method you suggest in your answer to question 3?

You might also like