Tijuana

Bradley Herrmann

ACCT 3201 SEC 002

October 28, 2014

Tijuana Bronze Machining

1. Production Costs

2. Contribution margin is calculated by subtracting total variable costs from total sales revenue. Valves: Revenue $57.78 x 7,500 units = $433,350 Costs $37.56 x 7,500 units = $281,700 Contribution Margin = $433,350 - $281,700 = $151,650

Pumps: Revenue $81.26 x 12,500 units = $1,015,750 Costs $63.12 x 12,500 = $789,000 Contribution Margin = $1,015,750 - $789,000 = $226,750

Flow Controllers: Revenue $97.07 x 4,000 = $388,280 Costs $56.50 x 4,000 = $226,000

Contribution Margin = $388,280 - $226,000 = $162,280

To compute the revenue, I used the actual selling price rather than the target selling price because it is a better representation of what happened. For the costs, I used to standard unit cost as shown in Exhibit 1. From there, I was able to calculate the contribution margins

3. Revised Product Costs

4. Activity Based Costing

For each overhead account, I took the data from Exhibit 3 to come up with the cost per unit for each account in the Manufacturing Overhead shown in Exhibit 2. Exhibit 1 shows that the target selling price was equal to the actual selling price, so it makes sense that the production cost per unit did not change much from the original standard unit cost. The actual selling price for pumps was lower than the target selling price, so it makes sense that the standard unit cost is valued lower under this approach. The actual selling price for flow controllers was higher than the target selling price, so it makes sense that the standard unit cost is valued higher under this approach. Although, I think my valuation may have been too high because the production cost per unit should be higher than the selling price

5.