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The Destin Brass case is an excellent and relatively simple introduction to
product costing. There are 5 exhibits in the case, and it is essential that you
understand the purpose of each of them as well as the meaning of the information
in them. There are four "requirements" listed at the bottom of page 4. IGNORE
them. Your assignment questions are as follows:
- Review the exhibits to be sure you understand the data and the
calculations, and the reasons for them.
- Demonstrate your understanding of the derivation of the product costs
under the existing system. Reproduce Exhibits 3 and 4 in Excel. Do NOT just
copy the numbers. DO the calculations to derive the numbers.
- Use the data in Exhibit 5 as well as the other data on manufacturing
costs to estimate the cost of valves, pumps and flow controllers.
- Compare the estimated costs calculated in requirement 3 with the
standard costs in Exhibit 3 and the revised standard costs in Exhibit 4. Use
a graph in Excel to derive appropriate comparisons.
- What is going on? Why do you observe the results that you do? What are
the strategic implications of the analysis. [Put yourself in the shoes of
Roland Guidry, Destin's president. What marketing and/or manufacturing
decisions should you consider?]
- Assume that the folks at Destin decide to adopt the cost accounting
system you used to derive the answers to Requirement 3. Sales prices,
monthly production volumes, manufacturing processes and other variables
remain unchanged. Will monthly net income go up or down? Why?
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