TBM case Study Example | Topics and Well Written Essays - 1000 words

TBM - Case Study Example ence we are able to determine total production per unit as follows: Product (Valves) Explanation Cost Manufacturing overhead (4.39% X 4) 17.548 Materials    $16 Direct labor based on run labor (16% X 0.25) 4 Total standard cost    $38 Pumps       Manufacturing overhead (4.39% X 8) 35.096 Materials    $20 Direct labor based on run labor (16 X 0.50) 8 Total standard cost    $63 Flow Controllers       Direct labor based on run labor (16 X 0.40) 6.4 Materials    $22 Manufacturing overhead (4.39% X 6.4) 28.0768 Total standard cost    $56 2. No change Contribution margin = Sales - variable cost Since Mary Ford stipulated that, â€Å"In our situation, the only short-run variable cost is direct material" then the material cost can be considered to be the variable cost 3. This is using Mary Ford’s comments on a â€Å"more modern view† that uses material related overhead as well as additional overhead allocations. All products should have Per Unit Costs calcu lated and show all overhead computations Overhead cost = Materials handling + receiving cost MOC= $ (20,000+ 200,000) = $220000 Overhead rate based on materials cost= $ {220,000/458,000} Overhead rate based on materials cost= 0.480 (48%) Other overhead costs include Engineering = $100,000 Machine depreciation = $ 270,000 Main = $30,000 Packing and shipping = $60,000 Total overhead = $ 460,000 Overhead rate based on machine hours= ($460,000/ 10,800 hours) One machine =$ 42.59/hr Setup labor cost= [(Labor hour x Set-up Labor)/total units] = [ ($16 X8)/7500] = $0.02 Pumps = ($16 X 8)/12,500 = $0.01 Flow Controllers= ($16 X12)/4000 = $0.048 As a result, the product costs per unit is as shown in the table below: Product Explanation Cost Valves       Direct labor (16 X 0.25) 4 Setup labor    $0.02 Materials    $16 Other overhead ($42.59 X 0.5) 21.30 Materials overhead (0.480 X 16) $7.68 Total cost    49.00          Pumps       Setup labor    0.01 Materials overhead ( 0.480 X 20) 9.6 Other overhead ($42.59 X 0.5) 21.30 Direct labor (16X 0.50) 8 Materials    $20 Total cost    58.91 Flow Controllers       Direct labor (16 X 0.40) 6.4 Materials overhead (0.480 X 22) 10.56 Other overhead ($42.59 X 0.2) 8.52 Materials    $22 Setup labor (439% X 6.4) = 0.048 Total cost    $48 4. ABC method – show Per Unit and Total costs for all three products 5. No change 6. Prepare table that compares the results for the 3 products. You should show the Standard Cost, Gross Margin, and Gross Margin percentage-- Per Unit— for each product. Describe which system you favor and briefly explain your reasoning. You will be doing a more thorough analysis of your recommendations in Question 8 PUMPS Activity Rate Activity ABC Cost Materials 20 12,500 250,000 Labor 8 12,500 100,000 Overhead: Setup Labor 0.05 640 Receiving 0.3 3,800 Material Handling 3.04 38,000 Pack/Ship 1.11 13,800 Engineering "2.40" 30,000 Maintenance "1.39" 17,400 Machine Deprec "12 .5" 156,250 Total Overhead "20.79" 259,890 Total Cost "$48.79" $609,890.00 FLOW CONTROLLER FLOW CONTROLLER Activity Rate Act