Exhibit 3 Standard Unit Costs

Valves Pumps Flow Controllers

Material $16.00 $20.00 $22.00

Direct labor 4.00 8.00 6.40

Overhead @ 439% of direct

labor $ 17.56 35.12 28.10

Standard unit cost $37.56 $63.12 $56.50

Overhead

Machine depreciation $270,000

Set-up labor 2,688

Receiving 20,000

Materials handling 200,000

Engineering 100,000

Packing and shipping 60,000

Maintenance 30,000

$682,688

Total run labor = 9,725 hours x $16 = $155,600

Overhead rate - 682,688 / 155,600 = 439%

Exhibit 4 Revised Unit Costs

	Valves	Pumps	Flow Controllers
Material	$16.00	$20.00	$22.00
Material overhead ( %)	7.68	9.60	10.56
Set-up labor	0.02	0.05	0.48
Direct labor	4.00	8.00	6.40
Other overhead (machine hour basis)	21.30	21.30	8.52
Revised standard costs	$49.00	$58.95	$47.96

Material Related Overhead

Receiving $ 20,000

Materials handling 200,000

Total $ 220,000

Overhead Absorption Rate

$220,000 / $458,000 = 48% (material cost basis)

Other Overhead

Machine depreciation $270,000

Engineering 100,000

Packing and shipping 60,000

Maintenance 30,000

Total $460,000

Overhead Absorption Rate

$460,000 / 10,800 hours = $42.59 per machine hour

Please fill out the above with the information from Exhibits 3 and 4.

Flow Valves Pumps Controllers Basis of cost allocution Original standard costs - Exhibit 3 Revised standard costs - Exhibit 4 Activity based costs - Question 1 $ - $ Difference between ABC and original $ Difference between ABC and revised $ $ $