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    Destin Brass 2019 (SV)

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    PRITEE
    The document contains 5 exhibits that analyze product costs and profitability for valves, pumps, and flow controllers manufactured by the company on a monthly basis, including standard unit costs, manufacturing costs, overhead rates, activity-based costing analysis, and comparisons of actual versus target selling prices and gross margins. The exhibits show that flow controllers had a gross loss last month due to lower than target selling prices despite higher unit costs, while valves and pumps met gross margin targets through adjustments to standard unit costs using an activity-based costing approach. By allocating overhead costs based on transaction volumes and machine hours consumed, the activity-based costing analysis

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    Destin Brass 2019 (SV)

    Uploaded by

    PRITEE
    44 views11 pages
    The document contains 5 exhibits that analyze product costs and profitability for valves, pumps, and flow controllers manufactured by the company on a monthly basis, including standard unit costs, manufacturing costs, overhead rates, activity-based costing analysis, and comparisons of actual versus target selling prices and gross margins. The exhibits show that flow controllers had a gross loss last month due to lower than target selling prices despite higher unit costs, while valves and pumps met gross margin targets through adjustments to standard unit costs using an activity-based costing approach. By allocating overhead costs based on transaction volumes and machine hours consumed, the activity-based costing analysis

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    Destin Brass 2019 (sv)

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    The document contains 5 exhibits that analyze product costs and profitability for valves, pumps, and flow controllers manufactured by the company on a monthly basis, including standard unit costs, manufacturing costs, overhead rates, activity-based costing analysis, and comparisons of actual versus target selling prices and gross margins. The exhibits show that flow controllers had a gross loss last month due to lower than target selling prices despite higher unit costs, while valves and pumps met gross margin targets through adjustments to standard unit costs using an activity-based costing approach. By allocating overhead costs based on transaction volumes and machine hours consumed, the activity-based costing analysis

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    44 views11 pages

    Destin Brass 2019 (SV)

    Uploaded by

    PRITEE
    The document contains 5 exhibits that analyze product costs and profitability for valves, pumps, and flow controllers manufactured by the company on a monthly basis, including standard unit costs, manufacturing costs, overhead rates, activity-based costing analysis, and comparisons of actual versus target selling prices and gross margins. The exhibits show that flow controllers had a gross loss last month due to lower than target selling prices despite higher unit costs, while valves and pumps met gross margin targets through adjustments to standard unit costs using an activity-based costing approach. By allocating overhead costs based on transaction volumes and machine hours consumed, the activity-based costing analysis

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    Exhibit 1: Product Profitability Analysis 1

    Flow
    Valves Pumps
    Controllers
    Standard unit costs $37.56 $63.12 $56.50
    Target selling price $57.78 $97.10 $86.96
    Planned gross margin (%) 35% 35% 35%
    Last Month
    Actual selling price $57.78 $81.26 $97.07
    Actual gross margin 35% 22% 42%
    Exhibit 2: Monthly Product Summary 2

    Flow
    Product Lines Valves Pumps
    Controllers
    Monthly production 7,500 units 12,500 units 4,000 units

    No. of Runs (1 run) (5 runs) (10 runs)

    Monthly shipments 7,500 units 12,500 units 4,000 units

    No. of Shipments (1 shipment) (7 shipments) (22 shipments)


    Exhibit 2: Monthly Cost Summary 3

    Manufacturing Flow Monthly


    Valves Pumps
    Costs Controllers Total
    Material 4 components 5 components 10 components
    2 @ $2 = $4 3 @ $ 2 = $6 4@$1=$4
    2 @ 6 = 12 2 @ 7 = 14 5 @ 2 = 10
    1@8=8
    Total Material 16 20 22 458000
    Labor ($16/hr.) including employee benefits
    Set-up labor 8 hrs./prod. run 8 hrs./prod. run 12 hr./prod. run 168 hours
    Run Labor 0.25 hrs./unit 0.50 hrs./unit 0.40 hrs./unit 9,725 hours
    Machine usage 0.50 hrs./unit 0.50 hrs./unit 0.20 hrs./unit 10,800 hours
    Manufacturing Overhead
    Receiving 20000
    Materials handling 2,00,000
    Engineering 1,00,000
    Packing and shipping 60000
    Maintenance 30000
    Total 410000
    Machine dep. (units-of-prod. Method) $25/hr. of use, (10800 * 25) 270000
    Exhibit 3: Standard Unit Costs 4

    Valves Pumps Flow Controllers


    Material 16.00 20.00 22.00
    Direct labor (Run) 4.00 8.00 6.40
    Overhead @439% of direct labor $ 17.56 35.12 28.10
    Standard Unit Cost $ $37.56 $63.12 $56.50
    Overhead
    Machine depreciation 270,000
    Set-up labor (168*16) 2,688
    Receiving 20,000
    Materials handling 200,000
    Engineering 100,000
    Packing and shipping 60,000
    Maintenance 30,000
    682,688
    Total run labor cost= 9725 hours * $16 = $155,600
    Overhead rate=Total overheads/ Total run labor cost
    = 682688 / 155600 = 439%
    Full Costs
    Valves Pumps Flow Total %
    Controllers
    Material 16.00 20.00 22.00
    Direct labor 4.00 8.00 6.40

    Standard Unit Direct


    Cost $ $20.00 $28.00 $28.40
    #units 7,500 12,500 4,000
    Total Direct Cost $ $150,000 $350,000 $113,600 $613,600 47.34%
    Overhead
    Machine depreciation 270,000
    set-up labor (168*16) 2,688
    Receiving 20,000
    Materials handling 200,000
    Engineering 100,000
    Packing and shipping 60,000
    Maintenance 30,000 682,688 52.66%
    Total Cost $1,296,288
    Exhibit 4: Revised Unit Costs
    Valves Pumps Flow Controllers
    6

    Material 16.00 20.00 22.00


    Material overhead (48%) 7.68 9.60 10.56
    Set-up labor 0.02 0.05 0.48
    Direct labor 4.00 8.00 6.40
    Other overhead (machine hour basis) 21.30 21.30 8.52
    Revised standard cost $ 49.00 58.95 47.96
    Material Related Overhead
    Receiving 20000
    Material handling 200000
    Total 220000
    Overhead Absorption Rate= $220000 / $458000 = 48% (material cost basis)
    Other Overhead
    Machine depreciation 270000
    Engineering 100000
    Packing and shipping 60000
    Maintenance 30000
    Total 460000
    Overhead Absorption Rate = $460000/10800 hours = $42.59 per machine hour
    7

    Comparative Product Cost


    Flow
      Valves Pumps
    Controllers

    Direct Labor Cost Based allocation $37.56 $63.12 $56.50

    Material and Machine Based Allocation 49.00 58.95 47.96


    Exhibit 5: Monthly Overhead Cost Activity Analysis 8

    Flow
      Valves Pumps
    Controllers
    Receiving and Material Handling 4 transaction 25 transactions 100 transactions
    Receive each component once per run 3% 19% 78%
    Handle each components once per run 4 transaction 25 transactions 100 transactions
      3% 19% 78%
    Packing and Shipping: 1 transaction 7 transactions 22 transactions
    One packing order per shipment 3% 23% 73%
    Engineering: 20% 30% 50%
    Estimated engineering work-order %      
    Maintenance: 3750 hours 6250 hours 800 hours

    Machine - hour basis 35% 58% 7%


    Activity Based Costs
    9
    Cost items: Valves Pumps FC
    Material 16.00   20.00   22.00
    Set-up labor 0.02   0.05   0.48
    Direct labor 4.00   8.00   6.40
    Machine depreciation 12.50   12.50   5.00
    Receiving, material handling          
    220000*3% / 7500 0.88 220000*19% / 12500 3.34 220000*78% /4000 42.90
    Packing & Shipping          
    60000*3%/7500 0.24 60000*23%/12500 1.10 60000*73%/4000 10.95
    Engineering          
    100000*20% / 7500 2.67 100000*30% / 12500 2.40 100000*50% /4000 12.50
    Maintenance          
    30000*35%/7500 1.40 30000*58%/12500 1.39 30000*7%/4000 0.53
    Total Cost 37.71   48.78   100.76
    Actual Selling Price $57.78   81.26   97.07
    Gross profit/loss $20.07   32.48   -3.69
    Gross Profit % 35%   40%   -4%
    10

    Comparative Product Cost


      Valves Pumps Flow Controllers

    Direct Labor Cost Based allocation $37.56 $63.12 $56.50

    Material and Machine Based Allocation 49.00 58.95 47.96

    Activity-Based Costs (ABC) 37.71 48.78 100.76


    Profit Margins at Current Prices
    Flow
    Valves Pumps
    Controller

    Direct Labor Cost Based 35% 22% 42%

    Material & Machine Hour Based 15% 27% 51%

    Activity Based Costing 35% 40% (4%)

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