The following report was requested by Mr. Herb Alpert of Tijuana Bronze Machining. The following data was provided by Mrs. Mary Ford.
Exhibit 1Product Profitability AnalysisValvesPumpsFlow ControllersStandard unit cost$37.56$63.12$56.50Target selling price$57.78$97.10$86.96Planned gross margin %35%35%35%Last MonthActual selling price$57.78$81.26$97.07Actual gross margin35%22%42%Exhibit 2Monthly Production and Cost SummaryProduct lines ValvesPumpsFlow ControllersMonthly production 7,500 units12,500units4,000units(1 run)(5 runs)(10 runs)Monthly shipments 7,500 units12,500units4,000units(1 shipment)(7 shipments)(22 shipments)Material and Labor CostMonthly TotalMaterial4 components5 components10 components2 @ $2 =$4 3 @ $2 =$6 4 @ $1 =$42 @ 6 =122 @ 7 =145 @ 2 =101 @ 8 =8Total$16 $20 $22 $458,000Labor ($16 per hour including employee benefits)Set-up Labor8hours8hours12hours168hoursper production runper production runper production runRun Labor0.25hours0.50hours0.40hours 9,725 hoursper unitper unitper unitMachine Hours0.50hours0.50hours0.20hours 10,800 hoursper unitper unitper unitManufacturing OverheadReceiving$20,000Materials handling200,000Engineering100,000Packing and shipping60,000Maintenance30,000Machine depreciations (10 year life) 270,000Total $680,000Exhibit 3Monthly Overhead Activity AnalysisValvesPumpsFlow ControllersReceiving:Receive each component4 transactions25 transactions100 transactionsonce per run3%19%78%Materials Handling:Handle each component4 transactions25 transactions100 transactionsonce per receipt (60% of cost)3%19%78%Handle each component once4 transactions25 transactions100 transactionsper production run (40% of cost)3%19%78%Packing and Shipping:One packing order per shipment1 transactions7 transactions22 transactions4%23%73%Engineering:Estimated engineering workloadpercentage (subjective)20%30%50%Maintenance and depreciation:Machine hours basis3,750hours6,250hours800hours35%58%7%Using the information provided, we calculated the product cost per unit for valves, pumps and flow controllers that were reported in Exhibit 1.
Mary Ford and Les Paul at work recording during th...
The Atrocity Exhibition... Exhibit A
Exhibit CThis was done by first calculating the material cost for each item. This information was already provided to us by Exhibit 2. Material cost were $16 for valves, $20 for pumps, and $22 for flow controllers. Next direct labor was calculated by taking the provided amount of labor used for each item and multiplying it by the TBM's current labor rate. Direct labor costs were $4 for valves, $8 for pumps, and $6.40 for flow controllers. We then added direct material cost and direct labor cost together for each item. Then that number was subtracted from the standard unit cost provided...