Question:
Consider the following table:
|
|
|
Costs
|
|
|
Product Line
|
Sales$
|
Materials
|
Labor
|
|
Deep Draw
|
500
|
50
|
100
|
|
Stock Modified
|
500
|
60
|
90
|
|
Steel
|
500
|
70
|
80
|
|
Micrite
|
500
|
80
|
70
|
|
Consumer Mod
|
500
|
90
|
60
|
|
Valueline
|
500
|
100
|
50
|
|
Totals
|
3,000
|
450
|
450
|
|
|
|
|
|
|
Manufacturing Overhead
|
1,800
|
|
|
The $1800 of overhead breaks down according to the following schedule:
|
Distribution of Overhead
|
|
Department
|
Amount
|
Comments
|
|
Quality
|
300
|
Only Required for Deep Draw, Steel and Micrite Products
|
|
Engineering
|
450
|
Used by all departments 50% by Micrite
|
|
Purchasing
|
250
|
|
|
Material Control
|
150
|
|
|
Operations Management
|
650
|
|
|
Total
|
1800
|
|
Management’s stated goal is to focus its marketing and sales efforts on product lines that are the most profitable. Based on this information develop something approaching an ABC costing system. What assumptions will you have to make? Based on your calculations what product lines should management focus on growing? Are there any that you would suggest shutting down? What other information might be helpful?