Per the Destin Brass Case -- Based on the case exhibits, explain how the units of transactions in Exhibit 5 were arrived and the interpret the cost driver transactions'.

Exhibit 1 Product Profitability Analysis Valves $37.56 $57.78 35% Standard unit costs Target selling price Planned gross margin (%) Last Month Actual selling price Actual gross margin Monthly shipments Manufacturing Costs Material Exhibit 2 Monthly Product and Cost Summary Product Lines Valves Monthly production 7,500 units (1 run) 7,500 units (1 shipment) Total material Labor ($16 per hour including employee benefits) Set-up labor Run labor Machine usage $57.78 35% Manufacturing Overhead Receiving Materials handling Engineering Packing and shipping Maintenance 4 components 2 @ $2= $4 2 @ 6 = 12 - Total Machine depreciation (units-of-production method) $25 per hour of use 16 8 hours per production run 25 hours per unit 50 hours per unit Pumps $63.12 $97.10 35% $81.26 22% Pumps 12,500 units (5 runs) 12,500 units (7 shipments) 5 components 3 @ $2= $6 2 @ 7= 14 $20 Flow Controllers 8 hours per production run 50 hours per unit 50 hours per unit $ 20,000 200,000 100,000 60,000 30.000 $410,000 $56.50 $86.96 35% $97.07 42% Flow Controllers 4,000 units (10 runs) 4,000 units (22 shipments) 10 components 4 @ $1 = $ 4 5 2= 10 1 @ 8= 8 $22 12 hours per production run 40 hours per unit 20 hours per unit Monthly Total $458,000 168 hours 9,725 hours 10,800 hours $270,000 Exhibit 3 Standard Unit Costs Material Direct labor Overhead @ 439% of direct labor $ Standard unit cost Overhead Machine depreciation Set-up labor Receiving Materials handling Engineering Packing and shipping Maintenance 682,688 155,600 Valves $16.00 4.00 17.56 Total run labor = 9,725 hours x $16 = $155,600 Overhead rate =439% $37.56 Pumps $20.00 8.00 35.12 $63.12 $270,000 2,688 20,000 200,000 100,000 60,000 30,000 $682,688 Flow Controllers $22.00 6.40 28.10 $56.50 Exhibit 4 Revised Unit Costs Material Material overhead (48%) Set-up labor Direct labor Other overhead (machine hour basis) Revised standard cost Material Related Overhead Receiving Materials handling Total Overhead Absorption Rate $220,000 $458,000 Other Overhead Machine depreciation Engineering Packing and shipping Maintenance Total Valves = 48% (materials cost basis) Overhead Absorption Rate $460,000 10,800 hours $16.00 7.68 .02 4.00 21.30 $49.00 = $42.59 per machine hour Pumps $20.00 9.60 .05 8.00 21.30 $58.95 20,000 200.000 $220,000 $270,000 100,000 60,000 30,000 $460,000 Flow Controllers $22.00 10.56 .48 6.40 8.52 $47.96 Exhibit 5 Monthly Overhead Cost Activity Analysis Valves Receiving and Materials Handling: Receive each component once per run Handle each component once per run Packing and Shipping: One packing order per shipment Engineering: Estimated engineering work-order percentage (subjective) Maintenance: Machine-hour basis 4 transactions (3%) 4 transactions (3%) 1 transaction (3%) 20% 3,750 hours (35%) Pumps 25 transactions (19%) 25 transactions (19%) 7 transactions (23%) 30% 6,250 hours (58%) Flow Controllers 100 transactions (78%) 100 transactions (78%) 22 transactions (73%) 50% 800 hours (7%) Exhibit 1 Product Profitability Analysis Valves $37.56 $57.78 35% Standard unit costs Target selling price Planned gross margin (%) Last Month Actual selling price Actual gross margin Monthly shipments Manufacturing Costs Material Exhibit 2 Monthly Product and Cost Summary Product Lines Valves Monthly production 7,500 units (1 run) 7,500 units (1 shipment) Total material Labor ($16 per hour including employee benefits) Set-up labor Run labor Machine usage $57.78 35% Manufacturing Overhead Receiving Materials handling Engineering Packing and shipping Maintenance 4 components 2 @ $2= $4 2 @ 6 = 12 - Total Machine depreciation (units-of-production method) $25 per hour of use 16 8 hours per production run 25 hours per unit 50 hours per unit Pumps $63.12 $97.10 35% $81.26 22% Pumps 12,500 units (5 runs) 12,500 units (7 shipments) 5 components 3 @ $2= $6 2 @ 7= 14 $20 Flow Controllers 8 hours per production run 50 hours per unit 50 hours per unit $ 20,000 200,000 100,000 60,000 30.000 $410,000 $56.50 $86.96 35% $97.07 42% Flow Controllers 4,000 units (10 runs) 4,000 units (22 shipments) 10 components 4 @ $1 = $ 4 5 2= 10 1 @ 8= 8 $22 12 hours per production run 40 hours per unit 20 hours per unit Monthly Total $458,000 168 hours 9,725 hours 10,800 hours $270,000 Exhibit 3 Standard Unit Costs Material Direct labor Overhead @ 439% of direct labor $ Standard unit cost Overhead Machine depreciation Set-up labor Receiving Materials handling Engineering Packing and shipping Maintenance 682,688 155,600 Valves $16.00 4.00 17.56 Total run labor = 9,725 hours x $16 = $155,600 Overhead rate =439% $37.56 Pumps $20.00 8.00 35.12 $63.12 $270,000 2,688 20,000 200,000 100,000 60,000 30,000 $682,688 Flow Controllers $22.00 6.40 28.10 $56.50 Exhibit 4 Revised Unit Costs Material Material overhead (48%) Set-up labor Direct labor Other overhead (machine hour basis) Revised standard cost Material Related Overhead Receiving Materials handling Total Overhead Absorption Rate $220,000 $458,000 Other Overhead Machine depreciation Engineering Packing and shipping Maintenance Total Valves = 48% (materials cost basis) Overhead Absorption Rate $460,000 10,800 hours $16.00 7.68 .02 4.00 21.30 $49.00 = $42.59 per machine hour Pumps $20.00 9.60 .05 8.00 21.30 $58.95 20,000 200.000 $220,000 $270,000 100,000 60,000 30,000 $460,000 Flow Controllers $22.00 10.56 .48 6.40 8.52 $47.96 Exhibit 5 Monthly Overhead Cost Activity Analysis Valves Receiving and Materials Handling: Receive each component once per run Handle each component once per run Packing and Shipping: One packing order per shipment Engineering: Estimated engineering work-order percentage (subjective) Maintenance: Machine-hour basis 4 transactions (3%) 4 transactions (3%) 1 transaction (3%) 20% 3,750 hours (35%) Pumps 25 transactions (19%) 25 transactions (19%) 7 transactions (23%) 30% 6,250 hours (58%) Flow Controllers 100 transactions (78%) 100 transactions (78%) 22 transactions (73%) 50% 800 hours (7%)