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?

Exhibit 3 Standard Unit Costs Valves Pumps Flow Controllers Material $16.00 $20.00 $22.00 Direct labor 4.00 8.00 6.40 17.56 35.12 28.10 Overhead @ 439% ofdirect labor $ Standard unit cost $37.56 $63.12 $56.50 Overhead Machine depreciation Set-up labor Receiving Materials handling Engineering Packing and shipping Maintenance $270,000 2,688 20,000 200,000 100,000 60,000 30,000 $682,688 = Total run labor 9,725 hours x $16 = $155,600 682,688 Overhead rate 439% 155,600 Exhibit 4 Revised Unit Costs Valves Pumps Flow Controllers Material $20.00 $16.00 7.68 $22.00 10.56 9.60 Material overhead (48%) Set-up labor Direct labor .02 .05 48 4.00 8.00 6.40 21.30 21.30 8.52 Other overhead (machine hour basis) Revised Standard cost $49.00 $58.95 $47.96 Material Related Overhead 20,000 200,000 $220,000 Receiving Materials handling Total Overhead Absorption Rate $220,000 = 48% (materials cost basis) $458,000 Other Overhead Machine depreciation Engineering Packing and shipping Maintenance Total Overhead Absorption Rate $460,000 $42.59 per machine hour 10,800 hours $270,000 100,000 60,000 30,000 $460,000