Items

Valves
Pump
Flow controller

Total DM &
Units
DMC
7500
12500
4000

DL cost
pu
DLS pu
16
12.35
20
16.25
22
13

Overhead Allocation
Production runs
Setup Hours
Number of shipments
Engineering hours
Machine hours

Valves
20
100
40
60
3750

Pump
Flow controller
100
225
600
2700
100
200
240
600
6250
1200

Profitability Analysis
Total Cost (ABC method)
Total Cost pu
Selling Price
Gross Profit
Gross Profit Margin
GPM (Traditional mehtod)

Valves
347116
46
79
33
41%
35%

Pump
Flow controller
718042
395192
57
99
70
95
13
-4
18%
-4%
5%
38%

Inference

Even after raising SP of Flow controllers by 10% its GPM i

On the other hand, they were thinking that pumps have a
Valves have a very good GPM of 41% which is more than
They can reduce the SP of valves and adjust the amount

DMC
120000
250000
88000

DLS
92625
203125
52000

Total
Total OH
345
15600
3400
117000
340
109200
900
78000
11200
334800

OH pu
45
34
321
87
30

Valves
904
3441
12847
5200
112098
134491

Tota OH cost
Pump
4522
20647
32118
20800
186830
264917

ontrollers by 10% its GPM is -4%. Hence they need to look into the matter.
thinking that pumps have a GPM of 5% which is wrong. It is having a decent 18% GPM which is though below
of 41% which is more than their planned 35%
es and adjust the amount in Valves by increasing its SP to stop incurring losses

Tota OH cost
Flow controller
10174
92912
64235
52000
35871
255192

GPM which is though below company's planned margin of 35%