Exhibit 1 Wilkerson Company: Operating Results (March 2000)

Sales $2,152,500 100%

Direct Labor Expense 271,250
Direct Materials Expense 458,000
Manufacturing overhead:
Machine-related expenses $336,000
Setup labor 40,000
Receiving and production control 180,000
Engineering 100,000
Packaging and shipping 150,000
Total Manufacturing Overhead 806,000
Gross Margin $617,250 28.7%
General, Selling & Admin. Expense 559,650
Operating Income (pre-tax) $57,600 2.68%

Exhibit 2 Product Profitability Analysis (March 2000)

Valves Pumps Flow
Controllers
Direct labor cost $10.00 $12.50 $10.00
Direct material cost 16.00 20.00 22.00
Manufacturing overhead (@300%) 30.00 37.50 30.00
Standard unit costs $56.00 $70.00 $62.00

Target selling price $86.15 $107.69 $95.38

Planned gross margin (%) 35% 35% 35%

Actual selling price $86.00 $87.00 $105.00

Actual gross margin (%) 34.9% 19.5% 41.0%

Exhibit 3 Product Data

Product Lines Valves Pumps Flow
Controllers
Materials per unit (no. of components) 4 5 10
2 @ $2 = $ 4 3 @ $2 = $ 6 4 @ $1 = $ 4
2 @ 6 = 12 2 @ 7 = 14 5 @ 2 = 10
1@8= 8
Materials cost per unit $16 $20 $22
Direct labor per unit 0.40 DL hrs 0.50 DL hrs 0.40 DL hrs
Direct labor $/unit @ $25/DL hour $10 $12.50 $10
(including employee benefits)
Machine hours per unit 0.5 0.5 0.3
Exhibit 4 Monthly Production and Operating Statistics (March 2000)
Flow
Valves Pumps Controllers Total
Production (units) 7,500 12,500 4,000 24,000
Machine hours 3,750 6,250 1,200 11,200
Production runs 10 50 100 160
Number of shipments 10 70 220 300
Hours of engineering work 250 375 625 1,250

Budgeted revenues and expenses for Mar-2000

Selling price - per unit $86.15 $107.69 $95.38 Exhibit 2
Direct materials - per unit 16 20 22 Exhibit 3
Direct labour - per unit 10 13 10 Exhibit 3
Valves Pumps Flow cont
Sales mix (units) 7,500 12,500 4,000
Sales revenue $646,125 $1,346,125 $381,520
Direct expenses
Direct materials cost 120,000 250,000 88,000
Direct labour cost 75,000 156,250 40,000
Total direct costs 195,000 406,250 128,000
Gross margin 451,125 939,875 253,520
MOH allocated to product (300% of DL) 225,000 468,750 120,000
Profit before GSA costs 226,125 471,125 133,520
General, selling and admin costs 161,531 336,531 95,380
Operating profits (EBIT) 64,594 134,594 38,140
Operating profit / Sales 10% 10% 10%

Actual revenues and expenses for Mar-2000 Case Exhibit 1

Selling price - per unit (Actual) 86 87 105 Exhibit 2
Direct materials - per unit (Actual) 16 20 22 Exhibit 3
Direct labour - per unit (Actual) 10 13 10 Exhibit 3
Valves Pumps Flow cont
Sales volume (Actual) 7,500 12,500 4,000 Exhibit 4
Sales revenue $645,000 $1,087,500 $420,000
Direct expenses
Direct material costs 120,000 250,000 88,000
Direct labour expenses 75,000 156,250 40,000
Manufacturing overheads:
Machine-related expenses
Setup labor
Receiving and production control
Engineering
Packaging and shipping
Total Manufacturing Overhead
Gross Margin
General, Selling & Admin. Expense
Operating Income (pre-tax)

Wilkerson ABC costs at actual production volumes

Valves Pumps Flow cont
Production and sales (in units) 7,500 12,500 4,000
Sales revenue per unit 86 87 105
Sales revenue $645,000 $1,087,500 $420,000
Costs
Direct material costs $75,000 $156,250 $40,000
Direct labour costs $120,000 $250,000 $88,000
Manufacturing overhead allocation
Machine-related expenses 112,500 187,500 36,000
Setup labour 2,500 12,500 25,000
Receiving and production control 11,250 56,250 112,500
Engineering 20,000 30,000 50,000
Packaging and shipping 5,000 35,000 110,000
ABC manufacturing overhead 151,250 321,250 333,500
Total cost before GSA expenses 346,250 727,500 461,500
Hence, mfg cost per unit $46.17 $58.20 $115.38
Planned gross profit @ 35% of GFC $16.16 $20.37 $40.38
Right selling price - per unit $62.33 $78.57 $155.76
Actual profit / mfg cost 86.28% 49.48% -8.99% of GFC
Market price remunerative or not? YES YES NO

Contribution to GSA expenses 298,750 360,000 (41,500)

Actual margin at pre-GSA costs 46.3% 33.1% -9.9%
General, selling and admin expenses
Operating profit
DM + DL + MOH
OPM = EBIT /sales revenue
Unit costs
Direct material $10.00 $12.50 $10.00
Direct labour costs 16.00 20.00 22.00
Manufacturing overhead allocation
Machining expenses 15.00 15.00 9.00
Setup labour 0.33 1.00 6.25
Receiving and production control 1.50 4.50 28.13
Engineering 2.67 2.40 12.50
Packaging and shipping 0.67 2.80 27.50
ABC manufacturing overhead $20.17 $25.70 $83.38
DM + DL + MOH $46.17 $58.20 $115.38

Actual sales price $86.00 $87.00 $105.00

Actual profit before GSA expenses $39.83 $28.80 ($10.38)
Actual margin at pre-GSA costs 46.3% 33.1% -9.9%

Wilkerson ABC product costs at CAPACITY Unused

Valves Pumps Flow cont capacity
Production and sales (in units) 7,500 12,500 4,000
Sales revenue $645,000 $1,087,500 $420,000
Costs
Direct material costs $120,000 $250,000 $88,000
Direct labour costs $75,000 $156,250 $40,000
Manufacturing overhead allocation
Machining expenses 105,000 175,000 33,600 22,400
Setup labour 2,222 11,111 22,222 4,444
Receiving and production control 10,000 50,000 100,000 20,000
Engineering 20,000 30,000 50,000 0
Packaging and shipping 3,750 26,250 82,500 37,500
ABC manufacturing overhead 140,972 292,361 288,322 84,344
Total cost before GSA expenses 335,972 698,611 416,322
Hence, mfg cost per unit $44.80 $55.89 $104.08
Planned gross profit @ 35% of GFC $15.68 $19.56 $36.43
Right selling price - per unit $60.48 $75.45 $140.51
Actual profit / mfg cost 91.98% 55.67% 0.88% of GFC
Market price remunerative or not? YES YES YES

Contribution to GSA expenses 309,028 388,889 3,678

Actual margin at pre-GSA costs
General, selling and admin expenses
Operating profit
OPM = EBIT /sales revenue

Unit costs
Direct material $16.00 $20.00 $22.00
Direct labour costs 10.00 12.50 10.00
Manufacturing overhead allocation
Machining expenses 14.00 14.00 8.40
Setup labour 0.30 0.89 5.56
Receiving and production control 1.33 4.00 25.00
Engineering 2.67 2.40 12.50
Packaging and shipping 0.50 2.10 20.63
ABC manufacturing overhead $18.80 $23.39 $72.08
DM + DL + MOH $44.80 $55.89 $104.08
Actual sales price $86.00 $87.00 $105.00
Actual profit before GSA expenses $41.20 $31.11 $0.92
Actual margin at pre-GSA costs 47.9% 35.8% 0.9%
Peak time demand

12,000 m/c hrs

180 pdn runs
400 shipments
1250 hours

Aggregate
24,000
$2,373,770

458,000
271,250
729,250
1,644,520
813,750
830,770
593,442
237,328
10%

Aggregate

$2,152,500 U

458,000
271,250

$336,000
40,000
180,000
100,000
150,000
806,000 2.971429 <== actual MOH / actual DML
$617,250
 559,650
$57,600

Aggregate CD rate cost driver Valves Pumps Flow cont Total

24,000

$2,152,500

$271,250
$458,000

336,000 $30 machine hours 3,750 6,250 1,200 11,200

40,000 $250 production runs 10 50 100 160
180,000 $1,125 production runs 10 50 100 160
100,000 $80 hours of engg. work 250 375 625 1250
150,000 $500 No. of shipments mad 10 70 220 300
806,000
1,535,250

617,250

559,650
$57,600

2.7%
 cost
driver full
Aggregate rate cost driver Valves Pumps FC Unused capacity
24,000
$2,152,500

$458,000
$271,250

336,000 $28 machine hours 3,750 6,250 1,200 800 12,000

40,000 $222 production runs 10 50 100 20 180
180,000 $1,000 production runs 10 50 100 20 180
100,000 $80 hours of engineering 250 375 625 0 1250
150,000 $375 No. of shipments mad 10 70 220 100 400
806,000
1,535,250

617,250

559,650
$57,600
2.7%