TBM

ence we are able to determine total production per unit as follows: Product (Valves) Explanation Cost Manufacturing overhead (4.39% X 4) 17.548 Materials $16 Direct labor based on run labor (16% X 0.25) 4 Total standard cost $38 Pumps Manufacturing overhead (4.39% X 8) 35.096 Materials $20 Direct labor based on run labor (16 X 0.50) 8 Total standard cost $63 Flow Controllers Direct labor based on run labor (16 X 0.40) 6.4 Materials $22 Manufacturing overhead (4.39% X 6.4) 28.0768 Total standard cost $56 2. No change Contribution margin = Sales – variable cost Since Mary Ford stipulated that, In our situation, the only short-run variable cost is direct material then the material cost can be considered to be the variable cost 3. This is using Mary Ford’s comments on a more modern view that uses material related overhead as well as additional overhead allocations. All products should have Per Unit Costs calculated and show all overhead computations Overhead cost = Materials handling + receiving cost MOC= $ (20,000+ 200,000) = $220000 Overhead rate based on materials cost= $ {220,000/458,000} Overhead rate based on materials cost= 0.480 (48%) Other overhead costs include Engineering = $100,000 Machine depreciation = $ 270,000 Main = $30,000 Packing and shipping = $60,000 Total overhead = $ 460,000 Overhead rate based on machine hours= ($460,000/ 10,800 hours) One machine =$ 42.59/hr Setup labor cost= [(Labor hour x Set-up Labor)/total units] = [ ($16 X8)/7500] = $0.02 Pumps = ($16 X 8)/12,500 = $0.01 Flow Controllers= ($16 X12)/4000 = $0.048 As a result, the product costs per unit is as shown in the table below: Product Explanation Cost Valves Direct labor (16 X 0.25) 4 Setup labor $0.02 Materials $16 Other overhead ($42.59 X 0.5) 21.30 Materials overhead (0.480 X 16) $7.68 Total cost 49.00 Pumps Setup labor 0.01 Materials overhead (0.480 X 20) 9.6 Other overhead ($42.59 X 0.5) 21.30 Direct labor (16X 0.50) 8 Materials $20 Total cost 58.91 Flow Controllers Direct labor (16 X 0.40) 6.4 Materials overhead (0.480 X 22) 10.56 Other overhead ($42.59 X 0.2) 8.52 Materials $22 Setup labor (439% X 6.4) = 0.048 Total cost $48 4. ABC method – show Per Unit and Total costs for all three products 5. No change 6. Prepare table that compares the results for the 3 products. You should show the Standard Cost, Gross Margin, and Gross Margin percentage– Per Unit— for each product. Describe which system you favor and briefly explain your reasoning. You will be doing a more thorough analysis of your recommendations in Question 8 PUMPS Activity Rate Activity ABC Cost Materials 20 12,500 250,000 Labor 8 12,500 100,000 Overhead: Setup Labor 0.05 640 Receiving 0.3 3,800 Material Handling 3.04 38,000 Pack/Ship 1.11 13,800 Engineering 2.40 30,000 Maintenance 1.39 17,400 Machine Deprec 12.5 156,250 Total Overhead 20.79 259,890 Total Cost $48.79 $609,890.00 FLOW CONTROLLER FLOW CONTROLLER Activity Rate Act