GIVEN DATA ANALYSIS

Exhibit 1: Wilkerson Company: Operating Results (March 2000) Activity Based Costing - Overheads

Allocation Rate at
Cost Total Cost Driver actual
(per unit driver)
Sales $ 2,152,500 100% Machine related expense /unit $ 336,000 Machine hrs $ 30
Direct labour expense $ 271,250 Setup labour /unit $ 40,000 Production Runs $ 250
Direct materials expense $ 458,000 Receiving and production control /unit $ 180,000 Production Runs $ 1,125
Manufacturing overhead Engineering cost /unit $ 100,000 Engineering Hrs $ 80
Machine related expenses $ 336,000 Packaging and shipping $ 150,000 Shipments $ 500
setup labor $ 40,000
Receiving and production control $ 180,000
engineering $ 100,000 Per Unit Costs at actual Valves Pumps Flow Controller
Packaging and shipping $ 150,000 Direct Labor Cost $ 10.00 $ 12.50 $ 10.00
Total manufacturing overhead $ 806,000 Direct material cost $ 16.00 $ 20.00 $ 22.00
Gross Margin $ 617,250 29%
SG&A Expenses $ 559,650 Manufacturing Overheads
operating income $ 57,600 3% Machine related expenses $ 15.00 $ 15.00 $ 9.00
setup labor $ 0.33 $ 1.00 $ 6.25
Exhibit 2: Product Profitability Analysis (March 2000) Receiving and production control $ 1.50 $ 4.50 $ 28.13
engineering $ 2.67 $ 2.40 $ 12.50
Valves Pumps Flow Controller Packaging and shipping $ 0.67 $ 2.80 $ 27.50
Direct Labor Cost $ 10.00 $ 12.50 $ 10.00 Total Manufacturing Overheads $ 20.17 $ 25.70 $ 83.38
Direct material cost $ 16.00 $ 20.00 $ 22.00
Manufacturing OH (300% of DL) $ 30.00 $ 37.50 $ 30.00 Total Production Cost $ 46.17 $ 58.20 $ 115.38
standard unit cost $ 56.00 $ 70.00 $ 62.00
Selling price (Targer) @35% GM $ 71.03 $ 89.54 $ 177.50
Target selling price $ 86.15 $ 107.69 $ 95.38
Planned gross margin 35% 35% 35%

Actual Selling price $ 86.00 $ 87.00 $ 105.00 Particular Valves Pumps Flow Controller
Actual gross margin 34.9% 19.5% 41.0% Units Sold 7,500 12,500 4,000

Exhibit 3: Product Data Actual Selling Price $ 86.00 $ 87.00 $ 105.00

Product Line Valves pumps Flow controllers Unit Cost using current method $ 56.00 $ 70.00 $ 62.00
Material per unit 4 5 10 Gross Margin 34.9% 19.5% 41.0%
4 @ $1 = $4
2 @ $2 = $4 3 @ $2 = $6 5 @ $2 = $10
Details 2 @ $6 = 12 2 @ $7 = 14 1 @ $8 = $8
Materials cost per unit $ 16.00 $ 20.00 $ 22.00 Unit Cost using ABC - at actual $ 46.17 $ 58.20 $ 115.38
direct labor per unit 0.4 0.5 0.4 Gross Margin 46.3% 33.1% -9.9%
direct labor $/unit @ 25/DL hour $ 10.00 $ 12.50 $ 10.00
Machine hours per unit 0.5 0.5 0.3 Unit Cost using ABC - at Capacity $ 45.80 $ 56.89 $ 104.68
Gross Margin 46.7% 34.6% 0.3%
Exhibit 4: Monthly Production & operating Statistics (March 2000)

Valves Pumps Flow controller Total Total at Capacity

Production 7,500 12,500 4,000 24,000 -
Machine hours 3,750 6,250 1,200 11,200 12,000
Production runs 10 50 100 160 180
Number of shipments 10 70 220 300 400
Hours of engineering work 250 375 625 1,250 1,250
ANALYSIS

Allocation Rate at
Capacity Direct Labor
(per unit driver) 25
$ 30 Machine related expense /unit 30
$ 222 Setup labour /unit 222.22
$ 1,000 Receiving and production control /uni 1000
$ 80 Engineering cost /unit 80
$ 375 Packaging and shipping 375

Per Unit Costs at Capacity Valves Pumps Flow Controller

Direct Labor Cost $ 10.00 $ 12.50 $ 10.00
Direct material cost $ 16.00 $ 20.00 $ 22.00

Manufacturing Overheads
Machine related expenses $ 15.00 $ 15.00 $ 9.00
setup labor $ 0.30 $ 0.89 $ 5.56
Receiving and production control $ 1.33 $ 4.00 $ 25.00
engineering $ 2.67 $ 2.40 $ 12.50
Packaging and shipping $ 0.50 $ 2.10 $ 20.63
Total Manufacturing Overheads $ 19.80 $ 24.39 $ 72.68

Total Production Cost $ 45.80 $ 56.89 $ 104.68

Selling price (Target) @35% GM $ 70.46 $ 87.52 $ 161.05

Per Unit Costs at actual Valves Pumps Flow Controller

Direct Labor Cost $ 75,000.00 $ 156,250.00 $ 40,000.00
Direct material cost $ 120,000.00 $ 250,000.00 $ 88,000.00
$ - $ - $ -
Manufacturing Overheads $ - $ - $ -
Machine related expenses $ 112,500.00 $ 187,500.00 $ 36,000.00
setup labor $ 2,500.00 $ 12,500.00 $ 25,000.00

Receiving and production control $ 11,250.00 $ 56,250.00 $ 112,500.00

engineering $ 20,000.00 $ 30,000.00 $ 50,000.00
Packaging and shipping $ 5,000.00 $ 35,000.00 $ 110,000.00
Total Manufacturing Overheads $ 151,250.00 $ 321,250.00 $ 333,500.00
$ - $ - $ -
Total Production Cost $ 346,250.00 $ 727,500.00 $ 461,500.00

Selling price (Targer) @35% GM $ 532,692.31 $ 1,119,230.77 $ 710,000.00