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What is your estimate of the current "contribution margins" for the three products? Show your calculations and explain please.

Exhibit 1:

Exhibit 2:

Exhibit 3:

L Product Profitability Analysis - - Valves $37.56 $57.78 35% Standard unit cost Target selling price Planned Gross Margin % Flow Pumps Controllers $63.12 $56.50 $97.10 $86.96 35% 35% - - Last Month Actual Selling price Actual Gross Margin $57.78 35% $81.26 22% $97.07 42% Monthly Production and Cost Summary Flow Controllers Monthly Total Labor Costs Valves Pumps $16 Valves Flow Pumps Controllers Labor Rate (includes benefits) (hourly rate) Production/Shipments Monthly Production units runs 7,500 1 4,000 10 12,500 5 8 8 12 168 Set-up Labor (hours per production run) 0.25 0.5 0.4 9,725 Monthly Shipments units shipments 7,500 1 12,500 7 4,000 22 Run Labor (hours per unit) Flow Pumps Controllers Monthly Total Monthly Total Flow Pumps Controllers Valves Machine Hours Material Costs Valves 0.5 0.5 0.2 Material Component Count 10,800 4 5 10 Machine Hours (hours per units) 3 component count compenent cost Cost 2 $2 $4 $2 $6 4 $1 $4 component count compenent cost Cost 2 $6 $12 2 $7 $14 5 $2 $10 Manufacturing Overhead Overhead Receiving $20,000 Materials handling $200,000 Engineering $100,000 Packing & Shipping $60,000 Maintenance $30,000 Machine depreciation (10 yr) $270,000 Total $680,000 component count compenent cost Cost 0 $0 $0 0 $0 $0 1 $8 $8 TOTAL Component Cost $16 $20 $22 Total Cost by Product Line $120,000 $250,000 $88,000 $458,000 Monthly Overhead Activity Analysis Flow Pumps Controllers Valves TOTAL NOTE Receiving Transactions per run % 100 receive each component once per run 4 3% 25 19% 78% 129 100% Materials Handling Transactions per receipt % 4 3% 25 19% 100 78% handle each component once per receipt (60% of cost) 129 100% Transactions per production run % 4 3% 25 19% 100 78% handle each coomponent once per production run (40% of cost) 129 100% Packing and Shipping Transactions % 1 4% 1 packing order per shipment 7 23% 22 73% 30 100% Engineering workload % 20% 30% 50% 100% est. engineering workload % (subjective) Maintenance & Depreciation Machine hours basis % 3,750 35% 6,250 58% 800 7% 10,800 100%

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