Monroe Clock Company
Summary
Monroe Clock Company
● Started by Jim Monroe in 1985
● Manufactures decorative electric clocks until 1992
● In 1998, Monroe has sold out to Piedmont Appliance
Corporation
● Currently manufactures 3 basic models
● Sales grew around $50 million (50% from Piedmont
Appliance and 50% other companies)
Summary
New Household Timing Device
● Monroe’s Timer - 2 options:
1. One 48-hour cycle (back-and-forth motion)
2. Two 24-hour cycles (single operation/timer)
● The complete product would be sold through wholesalers and manufacturers’ representatives.
Statement of the Problem
What should Monroe Clock Company’s full cost computations be given the new overhead rates for its’ cost centers?
Case Facts
The Issue of the Overhead Costs
Case Facts
New Household Timers
● No more machining and little fabrication
● More wiring and assembly work involved
● Low overhead activity
Existing Timers (main products) ● Timing mechanismssame sequence of production steps
● Heavy duty- more machined parts instead of stamped parts
Case Facts
● Cost ideas:
Tom Grant – Controller
$ 11.60
Frank Tyler - Sales Manager
$ 6.30
● 3 Cost Centers
1. Fabrication- punching,stamping and drilling
2. Machining- lathes,milling machines and grinders
3. Assembling
How were these costs computed?
How were these costs computed?
How were these costs computed?
Guide Questions
1. Using the new overhead rates, recompute the new household timer’s cost on a fully allocated basis.
2. Using $85,000 as a target contribution (from which advertising would be taken), determine how many of the timers would have to be sold at $8.00, $10.00, and
$15.00 to achieve that contribution to fixed costs and profit. Answers
1. Using the new overhead rates, recompute the new household timer’s cost on a fully allocated basis.
Total Est. Mfg. Cost
Add: SGA (15%)
Add: 10% Profit
Factory Price
Wholesale, Retail Dist. (50% of SP)
Total Est.
Monroe Clock Company
● Started by Jim Monroe in 1985
● Manufactures decorative electric clocks until 1992
● In 1998, Monroe has sold out to Piedmont Appliance
Corporation
● Currently manufactures 3 basic models
● Sales grew around $50 million (50% from Piedmont
Appliance and 50% other companies)
Summary
New Household Timing Device
● Monroe’s Timer - 2 options:
1. One 48-hour cycle (back-and-forth motion)
2. Two 24-hour cycles (single operation/timer)
● The complete product would be sold through wholesalers and manufacturers’ representatives.
Statement of the Problem
What should Monroe Clock Company’s full cost computations be given the new overhead rates for its’ cost centers?
Case Facts
The Issue of the Overhead Costs
Case Facts
New Household Timers
● No more machining and little fabrication
● More wiring and assembly work involved
● Low overhead activity
Existing Timers (main products) ● Timing mechanismssame sequence of production steps
● Heavy duty- more machined parts instead of stamped parts
Case Facts
● Cost ideas:
Tom Grant – Controller
$ 11.60
Frank Tyler - Sales Manager
$ 6.30
● 3 Cost Centers
1. Fabrication- punching,stamping and drilling
2. Machining- lathes,milling machines and grinders
3. Assembling
How were these costs computed?
How were these costs computed?
How were these costs computed?
Guide Questions
1. Using the new overhead rates, recompute the new household timer’s cost on a fully allocated basis.
2. Using $85,000 as a target contribution (from which advertising would be taken), determine how many of the timers would have to be sold at $8.00, $10.00, and
$15.00 to achieve that contribution to fixed costs and profit. Answers
1. Using the new overhead rates, recompute the new household timer’s cost on a fully allocated basis.
Total Est. Mfg. Cost
Add: SGA (15%)
Add: 10% Profit
Factory Price
Wholesale, Retail Dist. (50% of SP)
Total Est.