Operating Results

Sales $ 2,152,500
Direct labour expense $ 271,250
Direct materials expense $ 458,000
Manufacturing overhead
Machine related expenses $ 336,000
setup labor $ 40,000
Receiving and production control $ 180,000
engineering $ 100,000
Packaging and shipping $ 150,000
Total manufacturing overhead $ 806,000
Gross Margin $ 617,250
General, Selling and Admin expenses $ 559,650
operating income $ 57,600

Manufacturing overhead
Valves pumps
Machine related expense /unit $ 15 $ 15
Setup labour /unit $ 0.33 $ 1
Receiving and production control /unit $ 1.50 $ 4.50
Engineering cost /unit $ 2.67 $ 2.40
Packaging and shipping $ 0.67 $ 2.80

Manufacturing overhead $ 20 $ 26
Direct labor $ 10.00 $ 12.50
Direct material cost $ 16.00 $ 20.00

Actual Production Cost $ 46 $ 58

Target selling price @35% margin $ 71.03 $ 89.54

Loss due to Simple Cost accounting system

Valves pumps
Target selling price @35% margin/unit $ 71.03 $ 89.54
Actual selling price/unit $ 86.00 $ 87.00
Profit/Loss per unit $ 14.97 $ -2.54
Production Volume 7,500 12,500
Total Profit/Loss per product line $ 112,308 $ -31,731
Total Loss due to Simple Cost accounting system $ -209,423
% of Total Revenue -9.7%
 Product Profitability Analysis
100% Valves Pumps Flow Controller
Direct Labor Cost $ 10.00 $ 12.50 $ 10.00
Direct material cost $ 16.00 $ 20.00 $ 22.00
Manufacturing overhead $ 30.00 $ 37.50 $ 30.00
standard unit cost $ 56.00 $ 70.00 $ 62.00

Target selling price $ 86.15 $ 107.69 $ 95.38

Planned gross margin 35% 35% 35%

Actual Selling price $ 86.00 $ 87.00 $ 105.00

29% Actual gross margin 34.9% 19.5% 41.0%

3% Product Data
Product Line Valves pumps Flow controllers
Material per unit 4 5 10
Flow controllers Materials cost per unit $ 16.00 $ 20.00 $ 22.00
$ 9 direct labor per unit 0.4 0.5 0.4
$ 6.25 direct labor $/unit @ 25/DL hour $ 10.00 $ 12.50 $ 10.00
$ 28.13 Machine hours per unit 0.5 0.5 0.3
$ 12.50
$ 27.50 Monthly Production & operating Statistics
Valves pumps Flow controller Total
$ 83 Production 7,500 12,500 4,000 24,000
$ 10.00 Machine hours 3,750 6,250 1,200 11,200
$ 22.00 Production runs 10 50 100 160
Number of shipments 10 70 220 300
$ 115 Hours of engineering work 250 375 625 1,250

$ 177.50

Flow controllers
$ 177.50
$ 105.00
$ -72.50
4,000
$ -290,000
-209,423
-9.7%