case1 - Destin Brass Products Report To: From: Date: Roland...

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Destin Brass Products Report To: Roland Guidry From: , Yin Yin Date: 2011- 10- 9 This is the report about our products. After we use the new way which is the activity- transaction-based system to calculate our overhead cost, we get a group of new number for our manufacture cost. From Exhibit A , the unit cost is $37.71 for valves, $48.78 for pumps and $100.76 for flow controllers. Comparing the standard costing method and revised costing method, the activity-trans- action-based costing method allocates more manufacturing overhead on the flow con- trollers and less on pumps. This is mainly because we allocate the total manufacturing overhead using different bases, such as transaction percentages and cost percentages, and the flow controller occupies the largest percentage in many of the different activit- ies. So, the flow controller should carry the corresponding manufacturing overhead. Also, notice that neither of the standard costing or revised costing method considers that factor. Therefore, the flow controllers are allocated much more manufacturing over- head, and thereby have a negative gross margin, while the other two products are relat- ively profitable. The activity-transaction-based costing method is more specific and accurate for us to
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case1 - Destin Brass Products Report To: From: Date: Roland...

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