1. Use the Overhead Cost Activity Analysis in Exhibit 5 and other data on
manufacturing costs to estimate product costs for valves, pumps, and flow
controllers.
2. Compare the estimated costs you calculate to existing standard unit costs
(Exhibit 3) and the revised unit costs (Exhibit 4). What causes the different
product costing methods to produce such different results?
3. What are the strategic implications of your analysis? What actions would you
recommend to the managers at Destin Brass Products Co?
4. Assume that interest in a new basis for cost accounting at Destin Brass Products
remains high. In the following month, quantities produced and sold, activities, and costs were all at standard. How much higher or lower would the net income
reported under the activity-transaction-based system be than the net income that
will be reported under the present, more traditional system? Why?