Destin Brass Products Co
Destin Brass Products Co.
1) Estimated Product costs per unit:
Number of Units
7500
12500 4000 Valves Pumps Flow Controllers
Material Overhead
Receiving
$600.00
$3,800.00 $15,600.00
Materials Handling
$6,000.00
$38,000.00 $15,600.00
Manufacturing Overhead
Packing and Shipping
$1,800.00
$13,800.00 $43,800.00
Engineering
$20,000.00 $30,000.00 $50,000.00
Maintenance
$10,500.00 $17,400.00 $2,100.00
Material Related
Receiving
$20,000.00
Materials Handling
$200,000.00
Machine Depreciation
$270,000.00
$ 25 per machine hour
Engineering
$100,000.00
Packing and Shipping
$60,000.00
Maintenance
$30,000.00
Per Unit
Material
$16.00
$20.00 $22.00
Receiving
$0.08 $0.30 $3.90
Materials Handling
$0.80
$3.04 $3.90
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
Packing and Shipping
$0.24
$1.10 $10.95
Engineering
$2.67 $2.40 $12.50
Maintenance
$1.40 $1.39 $0.53
Total
$37.71
$48.79 $65.66
2) The different results from the different product costing methods are largely influenced by the allocation and division of Overhead costs in both materials and machine. ABC unit costs breaks out and allocates the Material overhead and Other overhead into smaller cost drivers using % of transactions in many areas. The Revised Unit Costs breaks out and allocates Overhead into Material and Other while the Standard Unit costs clumps all overhead together.
3) Strategic implications would be that the margins and amount of income for each of the products is very different using different overhead cost allocation methods. Since the competitors only probably produce one product (pumps) so the overhead costs aren’t subsidized by the
1) Estimated Product costs per unit:
Number of Units
7500
12500 4000 Valves Pumps Flow Controllers
Material Overhead
Receiving
$600.00
$3,800.00 $15,600.00
Materials Handling
$6,000.00
$38,000.00 $15,600.00
Manufacturing Overhead
Packing and Shipping
$1,800.00
$13,800.00 $43,800.00
Engineering
$20,000.00 $30,000.00 $50,000.00
Maintenance
$10,500.00 $17,400.00 $2,100.00
Material Related
Receiving
$20,000.00
Materials Handling
$200,000.00
Machine Depreciation
$270,000.00
$ 25 per machine hour
Engineering
$100,000.00
Packing and Shipping
$60,000.00
Maintenance
$30,000.00
Per Unit
Material
$16.00
$20.00 $22.00
Receiving
$0.08 $0.30 $3.90
Materials Handling
$0.80
$3.04 $3.90
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
Packing and Shipping
$0.24
$1.10 $10.95
Engineering
$2.67 $2.40 $12.50
Maintenance
$1.40 $1.39 $0.53
Total
$37.71
$48.79 $65.66
2) The different results from the different product costing methods are largely influenced by the allocation and division of Overhead costs in both materials and machine. ABC unit costs breaks out and allocates the Material overhead and Other overhead into smaller cost drivers using % of transactions in many areas. The Revised Unit Costs breaks out and allocates Overhead into Material and Other while the Standard Unit costs clumps all overhead together.
3) Strategic implications would be that the margins and amount of income for each of the products is very different using different overhead cost allocation methods. Since the competitors only probably produce one product (pumps) so the overhead costs aren’t subsidized by the