You can use this history to draw a growth path and illustrate vision, mission and strategic objectives of the organization. However, imitation is done in two ways. What is causing the different costs per product between the three different costing methods? Words: 736 - Pages: 3. After defining the problems and constraints, analysis of the case study is begin. Total overhead cost of the flow controller is 288,685 whereas the over head cost of pumps and valves are 260,887 and 113,116.
Could the production process for flow controllers be changed in such a way to allow Destin Brass Products to reduce the unit cost of flow controllers? Receiving Increases with the amount of shipments received Materials handling Increases when products are produced and shipped Engineering Increases with amount of products produced Packing and shipping Increase with amounts of products sent out Maintenance Increases with the amount of machine hours used After recalculating the costs with regards to the level of activity required by each product line, it was found that the prices charged for each product may not be appropriately aligned with the amount of resources required for each one. You should make a list of factors that have significant impact on the organization and factors that drive growth in the industry. A meeting was held to discuss the declining profits and a proposal to change their overhead allocation method was proposed. Flow controllers, a product line with little competition and a potentially growing profitability. The only relevant costs considered in this chapter are ordering costs, holding costs, and stockpot costs. The company has also calculated unit costs separating the overhead rates for receiving and shipping of materials from other overhead costs. We address this issue and by comparing activity based costing with the cost systems they already using, looking for a way in which they can be more competitive on the market.
What actions would you recommend to managers at Destin Brass Products Company? Finance and accounting, as mentioned by Ambler 2008 are the necessities and footing to the short and long being of any type of companies. Company spent 90 % of their sale attempts on keeping bing histories and 10 % on developing new clients. . Destin Brass is an ideal illustration of how critical is to hold an accurate bing method to follow to supply strategic determination devising. Use Exhibit 4 to calculate the activity rates per each activity for the material related overhead and the other overhead amounts. The revised cost accounting makes portion of the indirect costs as direct. Nokia established their concern in many topographic points around the universe as Brazil- Manus established in 1998, China- Beijing established in 1995, Hungary- Komaron established in 1999, India-.
Prices of pumps were under pressure from competitors. Making a cost pool for technology costs by ciphering how much technology is consumed by each merchandise. It is owned and operated by John Ringold, Sr. Porter Five Forces is a strategic analysis tool that will help you in understanding the relative powers of the key players in the business case study and what sort of pragmatic and actionable case study solution is viable in the light of given facts. Activity-based costing would be the most accurate method to understand the manufacturing process and costs of the product. Under this new accounting system, flow controllers appear even more profitable due to the.
In this method, overhead rate is incurred as the absorption rate is based on the material related overhead. The breakdown of the analysis is below. Alex took the control in 2001 in order to implement a process of modernization of the company. You should try to understand not only the organization but also the industry which the business operates in. Business environments are often complex and require holistic solutions. The challenging diagnosis for Destin Brass Products Co and the management of information is needed to be provided. Here, presuming that the measures of the productions and the gross revenues, stock list, selling monetary values stay the same, and the monetary values of stuff, labor, managing remains the same.
This paper will illustrate the recommended solutions for the management of the company that are trying to evaluate the competitive trends of the market for the mentioned products, and trying to start new strategies to deal with these trends. In which the total overhead cost is determined by summing the costs of machine depreciation, labor, the. Material and labor cost were not affected by the costing method and have thus been neglected. Where activity numbers have been provided use the actual activity amounts not their percentages as the case writers have rounded their percentages. Description A specialized manufacturer of brass valves, pumps, and flow controllers is troubled by competitive pricing in pumps and higher than expected margins for flow controllers. These product costs are found by adding together the direct material, direct labor, and overhead allocation for each product. Release Date: 04 December, 1989.
Their current cost account system is a traditional system which allocates overhead cost on the bases of production-run labor cost. Firstly, the introduction is written. The differences are a 3. . Compare the estimated costs you calculate to existing standard unit costs Exhibit 3 and the revised unit costs Exhibit 4.
Once you finished the case analysis, time line of the events and other critical details. Finance and accounting, as mentioned. There is need to further increase prices of Flow Controller. Could not figure out how competitors making profit unless being subsidized by other products. Therefore to select the best alternative, there are many factors that is needed to be kept in mind.