Destin Brass
Destin Brass Products
Destin Brass produces three products used for water purification systems: valves, pumps and flow controllers. They are seeing high competition in the pumps market while competitors are reducing the prices on pumps. Because they do not have any design advantages to their product, they feel they need to follow the market and lower their prices as well. A meeting was held to discuss the declining profits and a proposal to change their overhead allocation method was proposed.
1.) Use the Overhead Cost Activity Analysis in Exhibit 5 and other data on manufacturing costs to estimate product costs for values, pumps and flow controllers.
Based on the information in the case, the cost of valves is $39, the cost of pumps is $81 and the costs of flow controllers is $147. The breakdown of the analysis is below.
Total Values Pumps Flow Controllers
Manufacturing Costs
Material Cost per Unit 16 20 22
Units per Month 7500 12500 4000
Material Cost per Month 120000 250000 88000 Labor Costs
Production runs per month 1 5 10
Setup Labor Hours per Production Run 8 8 12
Run Labor Hours per Unit 0.25 0.5 0.4 Setup Labor Hours per Month 8 40 120
Run Labor Hours per Month 1875 6250 1600
Labor Costs per Hour 16
Setup Cost per Month 128 640 1920
Run Labor Cost per Month 30000 500000 256000 Machine Usage Costs
Machine Usage Hours per Unit 0.5 0.5 0.2
Machine Usage Hours per Month 10800 3750 6250 800
Machine Usage Cost per Month 25 93750 156250 20000 Overhead Costs
Receiving Cost 20000 620 3876 15504
Handling Cost 200000 6202 38760 155039
Packing & Shipping Cost 60000 12000 18000 18000
Engineering Cost 100000 20000 30000 30000
Maintenance Cost 300000 10417 17361 2222
Total Costs per Month 293116 1014887 586685
Standard Unit Costs 39.1 81.2 146.7
2.) Compare the estimated costs you calculate to existing standard unit costs (exhibit 3) and the revised unit costs
Destin Brass produces three products used for water purification systems: valves, pumps and flow controllers. They are seeing high competition in the pumps market while competitors are reducing the prices on pumps. Because they do not have any design advantages to their product, they feel they need to follow the market and lower their prices as well. A meeting was held to discuss the declining profits and a proposal to change their overhead allocation method was proposed.
1.) Use the Overhead Cost Activity Analysis in Exhibit 5 and other data on manufacturing costs to estimate product costs for values, pumps and flow controllers.
Based on the information in the case, the cost of valves is $39, the cost of pumps is $81 and the costs of flow controllers is $147. The breakdown of the analysis is below.
Total Values Pumps Flow Controllers
Manufacturing Costs
Material Cost per Unit 16 20 22
Units per Month 7500 12500 4000
Material Cost per Month 120000 250000 88000 Labor Costs
Production runs per month 1 5 10
Setup Labor Hours per Production Run 8 8 12
Run Labor Hours per Unit 0.25 0.5 0.4 Setup Labor Hours per Month 8 40 120
Run Labor Hours per Month 1875 6250 1600
Labor Costs per Hour 16
Setup Cost per Month 128 640 1920
Run Labor Cost per Month 30000 500000 256000 Machine Usage Costs
Machine Usage Hours per Unit 0.5 0.5 0.2
Machine Usage Hours per Month 10800 3750 6250 800
Machine Usage Cost per Month 25 93750 156250 20000 Overhead Costs
Receiving Cost 20000 620 3876 15504
Handling Cost 200000 6202 38760 155039
Packing & Shipping Cost 60000 12000 18000 18000
Engineering Cost 100000 20000 30000 30000
Maintenance Cost 300000 10417 17361 2222
Total Costs per Month 293116 1014887 586685
Standard Unit Costs 39.1 81.2 146.7
2.) Compare the estimated costs you calculate to existing standard unit costs (exhibit 3) and the revised unit costs