Reference no: EM13278806
1. Use the information in Exhibit 2 to calculate the product costs per unit for valves, pumps and flow controllers that are reported in Exhibit I. Show your calculations.
2. What is your estimate of the current "contribution margins" for the three products. Show your calculations and explain them.
3. Use the information in Exhibit 2 to calculate the revised product costs mentioned by Mary Ford on page 3.
4. Use the information in Exhibits 2 and 3 to calculate product costs for valves, pumps, and flow controllers under an "ABC" approach (Activity Based Costing).
5. If, in the following month, quantities produced and sold, activities, and costs were all at standard, how much higher or lower would the reported net income be under the ABC system than under the present system? Why?
6. Prepare a table which compares product profitability across the three products under the three product costing systems. Which system do you favor? Why?
7. Use the information in the ABC analysis to re¬evaluate the "HT" purchasing policy regarding flow controllers. Show your analysis. What is you conclusion?
8. What recommendations do you have for management? Why? Be specific. Support your recommendations with explicit analysis.