Destin Brass Products

Destin Brass Products Co. Case 1. Cost Material $22 Set-up constancy $0. 48 Direct Labor $6. 4 Machine dispraise (0. 2 hours per unit *$25 per hour of use) $5 Receiving and Material Handing (78% * $220000/4000) $42. Engineering (50%*$100000/4000) $12. 5 Packing and Shipping (73%*$60000/4000) $10. 95 Maintenance (7%*$30000/4000) $0. 525 Total Cost per Flow Controller $100. 755 2 Cost Traditional Revised ABC Set-up 16. 45% 71. 43% 71. 43% Machine Depreciation 16. 45% 7. 4% 7. 4% Receiving & Handling 16. 45% 19. 2% 78%Engineering 16. 45% 7. 4% 50% Packing & Shipping 16. 45% 7. 4% 73% Maintenance 16. 45% 7. 4% 7% 0. 4*4000*16/9725*16 = 16. 45% 12*10/168 = 71. 43% 0. 2 * 4000/10800 = 7. 4% 3. infra the traditional hail accounting system, the company allocated the total smash cost assigned to production on the basis of production-run labor cost. The unit labor cost of give ear controllers is $6. 4. The unit overhead cost allocated to it is only $28. 10. When using the revised cost accounting system, the company allocated the overhead cost based on simple machine hours.The machine hour of flow controllers is the lowest among the three products. So whether the company uses direct labor dollars or machine hours, the overhead costs allocated to flow controllers be relatively low since they consume less of this cost basis. When use ABC system, the company allocates the overhead cost on the basis of transactions. Among all the products, the company spends 78% of its receiving and materials handling, 73% of packing and shipping and 50% of engineering efforts on flow controllers.Since flow controller production use most of the transactions, the costs assigned to flow controllers are higher under ABC than they are under the traditional cost accounting system. 4. After using the ABC costing system, more overhead costs are allocated to flow controllers and less to valves and pump. Since other factors are stay the same, the net income for valves and pumps will increas e and the net income for flow controllers will decrease. Income does not change.