Destin Brass Essay

350 WordsJan 31, 20122 Pages
Kyle Birrell MBA 6120 Destin Brass Products Co. 1. ABC Costing | | Costs | Valves | Pumps | Flow Controllers | Cost Driver | Units | | 7500 | 12500 | 4000 | | Material Cost | | 16.00 | 20.00 | 22.00 | Material | Direct Labor | | 4.00 | 8.00 | 6.40 | Labor | Set-up Labor | | 0.02 | 0.05 | 0.48 | Labor | Receiving | 20000 | 0.08 | 0.30 | 3.90 | ABC | Handling | 200000 | 0.80 | 3.04 | 39.00 | ABC | Machine Depreciation | 270000 | 12.60 | 12.53 | 4.73 | Machine | Engineering | 100000 | 2.67 | 2.40 | 12.50 | ABC | Packing/Shipping | 60000 | 0.24 | 1.10 | 10.95 | ABC | Maintenance | 30000 | 1.40 | 1.39 | 0.53 | ABC | | | | | | | | Unit Cost | 37.81 | 48.82 | 100.49 | | 2. Standard Unit Cost Traditional | $ 37.56 | $ 63.12 | $ 56.50 | Standard Unit Cost Trad Rev | $ 49.00 | $ 58.95 | $ 47.96 | Standard Unit Cost ABC | $ 37.81 | $ 48.82 | $ 100.49 | | | | | There are noticeable differences in each of the costing methods. Each of the traditional methods use a single cost driver to estimate and allocate the overhead to each product. The difference between the first and the revised traditional estimates comes from using a different cost driver for each method. The ABC method can use multiple cost drivers since different costs can be driven by different things. 3. By seeing the differences in each of the methods above, the company’s management would have to buy in on which method they will move forward with. I would recommend they use the ABC method. By using this method, their profit margin will change for two of the three products, namely the pumps and flow controllers. The will be making a much higher profit margin on the pumps, but will need to do something to reduce costs on the flow controllers in order to make money. There biggest expense is the handling cost
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