Destin brass case-Destin Brass Case Essay example - Words | Bartleby

Below are the available bulk discount rates for each individual item when you purchase a certain amount. Register as a Premium Educator at hbsp. Publication Date: December 04, Industry: Manufacturing. Source: Harvard Business School.

Destin brass case

Destin brass case

Give n the fact that each of these activities have a different cost rate and that each product r squires proportionately different amounts of handling, receiving, packing and shipping g, engineering and maintenance, the total overhead allocated to each product w ill differ. So any expense incurred of a product is directly charged to that particular product rather than spreading the expense over all the products. This preview shows page Destin brass case out of 1 page. Indirect Destin brass case Cost related Destin brass case particular cost object but cannot be traced to it. Ultimately material cost, direct labor cost, and overhead cost are sum deed up to determine the standard unit cost of each product. Even though flow controllers gross margin is much lower under Destni, but higher gross margin and higher demand for pumps Desyin generate more revenue to the company and David starr mahwah cover loss make by flow controllers. Casse as a Premium Educator at hbsp. The process of charging overheads that are wholly associated with a particular cost centre to that centre. In Destin Brass case, the company tried to establish a high brand name for producing the valves, but later as an expansion to braass business, the company included two new product lines which are the pumps and the flow controllers keeping in mind the similarities of productions and the availability of the productions capacity.

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Nitish Bhardwaj. As a result, flow controllers appear much less expensive Deztin overhead associated with the labor going into making flow controllers was being allocated to pumps and valves. How would Linzie cambridge peterbrough escort change in the brss size for flow controller production affect unit costs? Mr Phil Newton. But, doing a determination following the standard costing method would hold caused black effects for the company Destun it would cut the profitable merchandise and concentrate on merchandises that are selling at a loss. Bongani Lungile Nameko. Sunil Sanjodiya. Use Exhibit 4 ccase calculate the activity rates per each activity for the material related overhead and the other overhead amounts. How Does it Work? It was used to regulate the rate and direction of the liquid. The bottom line will be affected in instance the consequences Destin brass case in the ABC method are considered and the merchandising monetary values are adjusted. Case study Cost Issues. The net net income would be the same as the net net income of the last month. In the criterion cost accounting there is no attempt made Destin brass case track the operating expense costs to the merchandises.

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  • Destin Brass was established in and have grown to produce valves, pumps and flow controllers.
  • What causes the different product costing methods to produce such different results?
  • This preview shows page 1 - 3 out of 6 pages.
  • Question 1 Use the Overhead Cost Activity Analysis in Exhibit 5 and other data on manufacturing costs to estimate product costs for valves, pumps and flow controllers.
  • This paper explains what causes the 3 different costing methods to produce different results.

This preview shows page 1 out of 1 page. I cannot even describe how much Course Hero helped me this summer. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero. University of Pittsburgh-Pittsburgh Campus. Uploaded By rvanand. Managerial Accounting- Destin Brass Case 1. Excel Output Attached 2. The revised unit cost method is different from the standard cost method only by that it uses machine hours and not labor for allocating overhead and again ignores other important aspects like standard costing.

Because it is effort driven costing it is closer to the actual cost incurred on the cost object. Excel Output Attached The strategic implication of the analysis is that the current product pricing for each product is not.

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Prabir Acharya. Introduction Destin Brass Products Co. Destin Brass Products Destin Brass produces three products used for water purification systems: valves, pumps and flow controllers. Problem Statement In trying to determine how competitors have been able to continually lower their pricing for pumps, Destin has taken a closer look at the cost accounting for their product lines, specifically how overhead costs are allocated to the products. Thao Nguyen. Standard costing method is a two-stage process. Furthermore, fiscal experts support the thought that direct costs is non the existent job as this can be tracked to the merchandise, but the issue is that bing computations gets complicated when seeking to apportion the operating expenses Indirect costs.

Destin brass case

Destin brass case

Destin brass case

Destin brass case. Essay on Destin Brass Case Analysis

Questions 3 What are the strategic implications of your analysis? What actions would you recommend to the managers at Destin Brass Products Co? The valve price will not have a significant change by applying the ABC system in comparison to the standard price. Generally, the activity based costing is the best system for Destin Brass Products Co to reinforce their position and standing as being competitive in their products pricing.

Question 4 Assume that interest in a new basis for cost accounting at Destin Brass Products remains high. In the following month, quantities produced and sold, activities, and cost were all at standard. How much higher or lower would the net income reported under the activity-transaction-based system be than the net income that will be reported under the present, more traditional system?

This is due to the difference of gross margin for pumps and flow controllers under the two systems. Even though flow controllers gross margin is much lower under activity-transaction-based, but higher gross margin and higher demand for pumps will generate more revenue to the company and could cover loss make by flow controllers.

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Related titles. Carousel Previous Carousel Next. Jump to Page. Search inside document. Case 2 : Destin Brass Products Co. Below is the summary of the allocation of overhead for each type of costing method. Agrata Pandey. Kambria Butler. Sahil Kashyap. Jasper Andrew Adjarani. Somu Das. Prabir Acharya. Ashim Abhinav Ekka.

Gautam Bindlish. Damian G. Akshay Aggarwal. Soumyajit Lahiri. Hamed Khazaee. What causes the different product costing methods to produce such different results? Destin Brass Products — Philip Larson. This is because the traditional method allocates overhead as a percentage of direct labor. Therefore, flow controllers appear cheaper than they are because the overhead they create gets applied across the other two products valves and pumps. Activity analysis reflects this providing pumps a lower unit cost because overhead that should have been allocated to flow controllers was not being allocated to pumps under this method.

Under the revised method, by contrast, valves appear more expensive, pumps appear more expensive, and flow controllers appear much, much less expensive than under the activity analysis. This is because the revised method applies overhead at an absorption rate based on material related overhead.

As a result, flow controllers appear much less expensive because overhead associated with the labor going into making flow controllers was being allocated to pumps and valves.

This explains why pumps and valves appear more expensive under this revised method than under activity analysis. 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? How would the change in the lot size for flow controller production affect unit costs? Has Destin Brass Products adopted the most profitable distribution system in the flow controller market?

What actions would you recommend to managers at Destin Brass Products Company? The strategic implications of this analysis suggest that the current production process for flow controllers might be changed to reduce the unit cost of flow controllers. In particular, if Destin Brass could reduce the production runs of flow controllers and pumps from 10 and 5 to a single run per month, this would drastically reduce the standard unit cost.

Additionally, Destin should consider reducing the number of transactions for receiving and handling of the flow controllers from Moreover, Destin Brass currently makes 22 shipments of flow controllers to their distributors and customers. The case does not say how many customers of flow controllers Destin Brass has, but if they could reduce the number of shipments being made they could further improve the standard unit cost of flow controllers.

In the following month, quantities produced and sold, activities, and costs were all at standard. This is because net income constitutes revenues minus all costs.

The new accounting system will clearly not change revenues. Furthermore, the new accounting system will not change the total costs. It will simply provide a better mechanism for allocating the costs across the various product lines. Therefore, the net income should remain the same.

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Destin Brass Products Co. Case Study Essay Example

Destin Brass Products Co. The company started in used to manufacture only valves initially but started brass pumps and flow controllers because they required the same manufacturing skills. Destin was manufacturing units per month. But recently the competitors the competitors have started reducing prices which has forced Destin Brass Products Co.

The production for pumps was units per month. Destined manufactured units in the previous month. The competitors may be using a different method of accounting whereas Destin is using the standard method of accounting. This might have resulted in the lower cost of pumps for the competitors. The process by which overheads are finally included in the cost of production of product.

The process of costing in which overheads are absorbed in product cost using some suitable method. The process of charging overheads that are wholly associated with a particular cost centre to that centre. Appropriation The process by which shared overheads are divided between related cost centres on an equitable basis.

The method of costing in which every cost is traced by appropriate cost driver which is based on the level of activity. Direct cost Cost related to particular cost object and that can be traced to it. Indirect cost Cost related to particular cost object but cannot be traced to it. In order to compete in the market destin had to reduce their prices. But as the competition is high, further price cut is again expected. So should destin reduce its price of not?

This might be there reason that the cost of pumps are higher than the competitors. Should destin adopt the new accounting method or not? In this method the overhead costs are allotted on the basis of direct labour charges. As given in Exhibit 4, material overhead are allotted on the basis of material used. As given in exhibit 5, costs can be allotted on the basis of the activities performed. The best solution would be to choose activity based costing because this seems to be the method which competitors are also choosing.

Also this method gives an explanation to reduce the price of the pumps. Use the Overhead Cost Activity Analysis and other data on manufacturing costs to estimate product costs for valves, pumps, and flow controllers Activity Based Costing. Compare the estimated costs you calculate to existing standard unit costs and the revised unit costs. What causes the different product costing methods to produce such different results?

What are the strategic implications of your analysis? What actions would you recommend to the managers at Destin Brass Products Co? How much higher or lower would the net income reported under the activity- transaction-based system be than the net income that will be reported under the present, more traditional system? There is no major difference in the net income using standard cost and ABC method cost.

But there is substantial difference in the cost of individual product. Learn more about Scribd Membership Bestsellers. Read Free For 30 Days. Much more than documents. Discover everything Scribd has to offer, including books and audiobooks from major publishers. Start Free Trial Cancel anytime. Des Tin Brass. Description: detin bras case.

Flag for inappropriate content. Related titles. Carousel Previous Carousel Next. Jump to Page. Search inside document. Absorption: The process by which overheads are finally included in the cost of production of product. Absorption costing: The process of costing in which overheads are absorbed in product cost using some suitable method.

Allocation: The process of charging overheads that are wholly associated with a particular cost centre to that centre. Activity based costing: The method of costing in which every cost is traced by appropriate cost driver which is based on the level of activity.

Unit cost Cost associated with one unit of production. Range of possible solutions Various possible solutions for managers are: 1. Continuing with existing costing method In this method the overhead costs are allotted on the basis of direct labour charges.

Revised standard unit costs As given in Exhibit 4, material overhead are allotted on the basis of material used. Activity based costing ABC method As given in exhibit 5, costs can be allotted on the basis of the activities performed. Selection of a solution The best solution would be to choose activity based costing because this seems to be the method which competitors are also choosing. Related Searches Destin brass. Kambria Butler. Paramjit Singh. Ariyo Roberto Carlos Banurea.

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Destin brass case

Destin brass case