Destin Brass Essay

Destin Brass Products Co.
MEMORANDUM

To: Senior Management of Destin Brass
From: Consulting Team 2
Subject: Is the company costing system enhancing profitability?
Date: 10/18/11
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After reviewing the exhibits provided to us from Peggy and Scott, we have created an Activity-Based Costing for Destin Brass’s Valve, Pumps and Flow Controllers in efforts to determine whether the company’s current costing system is in fact enhancing profitability. If you take a look at Exhibit 2, you can see the new costing Activity-Based Costing (ABC) System that we are proposing should be used to cost and price your products. The new costing system estimates the cost of the valves to be $37.75, the pumps to be $48.87, and the Flow Controllers to be $100.57.
The Pumps, the item which competitors have been continually reducing prices on, has a unit cost under the ABC that is $ 14.25 less than the standard unit cost and $ 10.08 less than the revised unit cost. The cost of the flow controllers has been significantly been under valued when you compare the standard unit cost and the revised unit cost to the ABC unit cost. The new cost of the Flow Controllers under the ABC costing is $ 44.07 more than the standard unit cost and $ 52.61 more than the revised unit