On the Basis of Traditional Cost Accounting

Valves
4 components
2@$2=$4
2@$6=$12

Materials/unit

material cost/unit
Direct Labor Cost
manufacturing overhead(@300% of labor cost)
total cost/unit
profit
selling price/unit
profit %age
standard profit %age

$
$
$
$
$
$

16.00
10.00
30.00
56.00
30.00
86.00
34.88%
35%

Pumps
5 components
3@$2=$6
2@$7=$14
$
$
$
$
$
$

20.00
12.50
37.50
70.00
17.00
87.00
19.54%
35%

On the basis of Activity Based Accounting(in case of normal demand)

Valves
Materials/unit
4 components
2@$2=$4
2@$6=$12
material cost/unit
Direct Labor Cost
Manufacturing Overhead
Machine related expenses
setup labor
receiving and production control
engineering
packaging and shipping
Total
production(units)
Manufacturing Overhead/unit
Total Cost
profit
Selling price/unit
profit%age

$
$
absorption rate
units
$
30.00
$
310.08
$
1,395.35
$
80.00
$
500.00

16.00
10.00
units

3750
4
4
250
10

$
$
$
$
$
$

112,500.00
1,240.31
5,581.40
20,000.00
5,000.00
144,321.71

7500

12500
$
$
$
$

19.24
45.24
40.76
86.00
47.39%

On the basis of Activity Based Accounting(in case of heavy demand)

Valves
Materials/unit
4 components
2@$2=$4
2@$6=$12
material cost/unit

6250
25
25
375
70

16.00

Direct Labor Cost

Manufacturing Overhead
Machine related expenses
setup labor
receiving and production control
engineering
packaging and shipping
Total
production(units)
Manufacturing Overhead/unit
Total Cost
profit
selling price/unit
profit%age

$
absorption rate
units
$
28.00
$
222.22
$
1,000.00
$
80.00
$
375.00

10.00
units

4018
11
11
250
13

$
$
$
$
$
$

112,500.00
2,500.00
11,250.00
20,000.00
5,000.00
151,250.00

7500

6696
56
56
375
93
12500

$
$
$
$

20.17
46.17
39.83
86.00
46.32%

Flow Controllers
10 components
4@$1=$4
5@$2=$10
1@$8=$8
$
22.00
$
10.00
$
30.00
$
62.00
$
43.00
$
105.00
40.95%
35%

Pumps
5 components
3@$2=$6
2@$7=$14
$
$

Flow Controllers
10 components
4@$1=$4
5@$2=$10
1@$8=$8
$
22.00
$
10.00

20.00
12.50
units

$
$
$
$
$
$

187,500.00
7,751.94
34,883.72
30,000.00
35,000.00
295,135.66

1200
100
100
625
220

$
$
$
$
$
$

36,000.00
31,007.75
139,534.88
50,000.00
110,000.00
366,542.64

4000
$
$
$
$

23.61
56.11
30.89
87.00
35.50%

Pumps
5 components
3@$2=$6
2@$7=$14
$

20.00

$
$
$
$

91.64
123.64
(18.64)
105.00
-17.75%

Flow Controllers
10 components
4@$1=$4
5@$2=$10
1@$8=$8
$
22.00

Machine related expenses

setup labor
receiving and production control
engineering
packaging and shipping

12.50

10.00

$
$
$
$
$
$

36,000.00
25,000.00
112,500.00
50,000.00
110,000.00
333,500.00

units
$
$
$
$
$
$

187,500.00
12,500.00
56,250.00
30,000.00
35,000.00
321,250.00

1286
113
113
625
293
4000

$
$
$
$

25.70
58.20
28.80
87.00
33.10%

$
$
$
$

83.38
115.38
(10.38)
105.00
-9.88%

Machine related expenses

setup labor
receiving and production control
engineering
packaging and shipping

chine related expenses

eiving and production control

kaging and shipping

Manufacturing Overheads
total
$
336,000.00
$
40,000.00
$
180,000.00
$
100,000.00
$
150,000.00

Manufacturing Overheads
total
cost drivers
$ 336,000.00 machine hours
$
40,000.00 production run
$ 180,000.00 production run
$ 100,000.00 hours of engineering work
$ 150,000.00 number of shipments

cost drivers
machine hours
11200
composite of production run
129
and machine com
composite of production run
129
and machine com
hours of engineering work1250
number of shipments
300

12000
180
180
1250
400

absorption rate
$
30.00
$
310.08
$
1,395.35
$
80.00
$
500.00