Profit Margin as per Company Calculation

Products % of Planned Actual

Company Gross Gross
Revenue Margin Margin
Pumps 55% 35% 22%
Valves 24% 35% 35%
Float Controllers 21% 35% 42%

Standard Unit Costs

Valves Pumps Flow
Controllers
Materials 16 20 22
Direct Labor 4 8 6.4
Overhead* 17.56 35.12 28.10
Std. Unit Cost 37.56 63.12 56.50  
Monthly Overhead Cost Activity Analysis
Overheads Total Basis Valves Pumps Flow controllers

% Total Per Unit % Total Per % Total Per

Unit Unit
Receiving 20000 No. of transactions 3% 600 0.08 19% 3800 0.30 78% 15600 3.90
Material handling 200000 No. of transactions 3% 6000 0.80 19% 38000 3.04 78% 156000 39.00
Engineering 100000 Estimated work orders 20% 20000 2.67 30% 30000 2.40 50% 50000 12.50
Packing and shipping 60000 No. of transactions 3% 1800 0.24 23% 13800 1.10 73% 43800 10.95
Maintenance 30000 Machine hr 35% 10500 1.40 58% 17400 1.39 7% 2100 0.53
Set up labour 2688 Set up labour hr 128 0.02 640 0.05 1920 0.48
Depreciation 270000 Machine Usage 93750 12.50 156250 12.50 20000 5.00
Total 682688 132778 17.70 259890 19.55 289420 72.36

Total Cost Per Unit as per ABC

Valves Pumps Flow
Contollers
Units of Production 7500 12500 4000
Overhead cost Per unit 17.70 20.79 72.36
Direct Labor Cost 4 8 6.4
Direct Material Cost 16 20 22
Total Cost per Unit 37.70 48.79 100.76

Notes:
1. Set Up Labour Valves Pumps Flow Total
Contollers
Monthly Production run 1 5 10 16
Set up labour (hrs) 8 8 12 28
Set up labour (per 8 40 120 168
production run)
no. of pdn run * labour 128 640 1920 2688
hrs/run

2. Depreciation Valves Pumps Flow Total

controllers
Monthly Production 7500 12500 4000 24000
Machine usage per unit 0.5 0.5 0.2 1.2
Machine usage hrly 3750 6250 800 10800
Machine Dep per hr of 25 25 25 75
use
Machine Depreciation 93750 156250 20000 270000  
   
 Activity Based Costs Per Unit Standard Costs Per Unit
Particulars Valves Pumps F.c Particulars Valves Pumps F.C
Material 16.00 20.00 22.00 Material 16.00 20.00 22.00
Labour 4.00 8.00 6.40 Labour 4.00 8.00 6.40
Receiving 0.08 0.30 3.90 Receiving 20000 0.51 1.03 0.82
Material handling 0.80 3.04 39.00 Material handling 200000 5.14 10.28 8.23
Engineering 2.67 2.40 12.50 Engineering 100000 2.57 5.14 4.11
Packing and shipping 0.24 1.10 10.95 Packing and 60000 1.54 3.08 2.47
Maintenance 1.40 1.39 0.53 Maintenance 30000 0.77 1.54 1.23
Set up labour 0.02 0.05 0.48 Set up labour 2688 0.07 0.14 0.11
Depreciation 12.50 12.50 5.00 Depreciation 270000 6.94 13.88 11.11
Total Cost Per Unit 37.70 48.79 100.76 Total Cost Per Unit 682688 37.55 63.10 56.48
Actual Selling Price 57.78 81.26 97.07 Actual Selling Price 57.78 81.26 97.07
Margin as % of Actual 35% 40% -4% Margin as % of 35% 22% 42%
Selling Price Actual Selling Price

Run Labour (hr) 9725

Labour Charges (per 16
h ) run labour
Total 155600

SUC Vs ABC
Particulars Valves Pumps F.c
SUC ABC % change SUC ABC % change SUC ABC % change
Receiving 0.51 0.08 -84.44 1.03 0.30 -70.44 0.82 3.90 374.09
Material handling 5.14 0.80 -84.44 10.28 3.04 -70.44 8.23 39.00 374.09
Engineering 2.57 2.67 3.73 5.14 2.40 -53.32 4.11 12.50 203.91
Packing and shipping 1.54 0.24 -84.44 3.08 1.10 -64.21 2.47 10.95 343.70
Maintenance 0.77 1.40 81.53 1.54 1.39 -9.75 1.23 0.53 -57.45
Set up labour 0.07 0.02 -75.30 0.14 0.05 -62.95 0.11 0.48 334.15
Depreciation 6.94 12.50 80.09 13.88 12.50 -9.95 11.11 5.00 -54.98
Total Cost Per Unit 37.55 37.70 0.41 63.10 48.79 -22.68 56.48 100.76 78.39
Overhead Per Unit 17.55 17.70 0.88 35.10 20.79 -40.77 28.08 72.36 157.68
Actual Selling Price 57.78 57.78 0 81.26 81.26 0 97.07 97.07 0.00
Margin as % of Actual 35% 35% -0.76 22% 40% 78.79 42% -4% -109.08
Selling Price

Stratgic Decision
Particular ABC SP Rqd Margn
Valves 37.70 57.78 35%
Pumps 48.79 75 35%
Flow Controller 100.76 155 35%