costing (ABC) in the latter paragraphs. The issue of misallocation cost With the use of Traditional Absorption Costing (TAC) which means Wilkerson Company is now only put the costing of direct labor and material in place. As we can see the table 1 below‚ the percentage of total direct cost allocation in Valves‚ Pumps and Flow Controllers are 46%‚ 46% and 52% respectively‚ and so for the manufacturing overhead are 54%‚ 54% and 48%. Table 1: Traditional Absorption Costing Product Valves ($)
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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
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Destin Brass Products Co. Case Study Destin Brass Products Co. has been established and grown to produce valves (24% of the company revenue)‚ pumps (55% of the company revenue)‚ and flow controllers (21% of the company revenue). This paper will illustrate the recommended solutions for the management of the company that are trying to evaluate the competitive trends of the market for the mentioned products‚ and trying to start new strategies to deal with these trends. Finance and accounting‚ as mentioned
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INTRODUCTION Destin Brass Products Co.‚ was facing competition in brass pumps market due to low prices set by competitors. The company started in 1984 used to manufacture only valves initially but started brass pumps and flow controllers because they required the same manufacturing skills. Valves represented 24% of the total revenue of the company and had a gross margin of 35%. Destin was manufacturing 7500 units per month Pumps (55% of the revenues) also required the same setup
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According to the case‚ if using ABC‚ Wilkerson should pool overheads into five activities: machine-related expenses‚ setup labor cost‚ receiving and production control cost‚ engineering cost‚ and packaging and shipping cost. The cost pool/cost driver information for an Activity Based Costing (ABC) system for Wilkerson has already provided by table 1. Based on the information on table 1 and four exhibit in case‚ we can figure out that the total cost per unit of valves‚ pumps and flow controllers are
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Mahir Industrial is a company that is well known for their exclusive design production of valves. The company is also known to be currently using the conventional costing system for their production of valves. The conventional costing system is used to trace and as well as to accumulate all of the direct costs and then disseminates the indirect costs of a manufacturing process. And so in this case‚ it is known that Mahir Industrial’s conventional costing system is used firstly‚ in order to find
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OVERVIEW This is a basic case in Activity-Based Costing (ABC) and Activity-Based Management (ABM). There is enough richness to the fact-situation to create a non-trivial calculational challenge for students without taking the case beyond an "introductory" level. Also‚ the business context for the calculations is rich enough to support good discussion on the managerial implications. I use Tijuana Bronze as the introductory case on ABC/ABM in the required managerial accounting course at Tuck and
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What would an ABC system look like at Wilkerson? What are the revised product costs and margins under such a system? Assumptions: We are assuming that the SG&A costs have no direct effect on the costing for each product line. SG&A was kept the same‚ whether using the original costing method or ABC costing. Calculations for ABC Costing: Machine Expense: $336‚000/11‚200 = $30 per machine hour Setup Expense: $40‚000/160 = $250 per setup Engineering Expense: $100‚000/1‚250 = $80
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The analysis below is related to Wilkerson Company‚ which is a manufacturer of a few products supplied to manufacturers of water purification equipment. The three products they manufacture are: 1. Valves- high quality and highest tolerances in the industry; this product is what the company started from. 2. High-volume pumps- quickly became a major supplier of pumps; they manufacture and spend more machine hours on producing this product 3. Flow controllers- most unique and highest selling product
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precisely cost each of Destin’s three products: valves‚ pumps‚ and flow controllers. BACKGROUND Destin Brass Products Company was founded by Guidry‚ Scott‚ and Steve Abbott‚ the current sales and marketing manager. After a conversation with the president of a large water purification equipment manufacturer‚ Abbott discovered an opportunity to produce high quality brass valves since the manufacturer was dissatisfied with the quality of brass valves currently available. Scott was known for his
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