Exhibit 1

Monthly Income Statement for January

Product Sales Volume Price/unit Revenue Production volume Cost/unit Total DM

Pitons 4,200 $ 10.50 $44,100.00 4200 $1.45 $6,090.00

Hammers 400 $ 61.00 $24,400.00 400 $10.44 $4,176.00

Rock nut sets 2300 $ 24.50 $56,350.00 2300 $ 6.01 $13,823.00

Total $124,850.00 % of sales 100%

Total DM $24,089.00 % of sales 19.3%

Direct Labor $47,916.67 % of sales 38.4%

Manufacturing Overhead

Light, Heat, and Power $2,855.00

Supplies $725.00 Depreciation $ 1,612.92

Manufacturing occupancy $2,200.00

Supervision $5,270.83

Total manufacturing overhead $12,663.75

Cost of Goods Sold $84,669.42 % of sales 67.8%

Gross Margin $40,180.58 % of sales 32.2%

S, G, and A Expense

Office salaries $ 10,541.67

General administration $ 600.00

Administrative occupancy $ 550.00

Shipping and delivery $ 745.00

$12,436.67 10%

Operating Income for the Month $27,743.91 22%

Exhibit 2

Guilias annual salary $63,250 Jeremys annual salary $63,250 Granbys annual salary $63,250 Annual labor payroll per head $57,500 Total annual building occupancy cost $33,000

Office occupies 20% of building

Delivery costs per hammer $1.00

per rock nut set $0.15

Variable power per piton $0.18

Variable power per hammer $0.46

Variable power per rock nut set $0.05

Supplies per piton $0.11

Supplies per hammer $0.14 Supplies per rock nut set $0.09

Exhibit 4: Standard Labor and Machine Times

Labor minutes

Cold roll & cut over &dropgorge bore deburr & polish assemble injection mold package total

pitons 1 0.37 0.4 0.2 0.03 2

hammers 2.35 2.6 1.6 0.35 5.6 0.5 13

rock nut sets 1.7 2.2 0.1 4

Machine Minutes

pitons 0.8 0.3 0.3 0.1 0 1.5

hammers 2 2.25 1.5 0.25 5 0 11

rock nut sets 1 1 0 2

Monthly costs and work station data

Laborers 2 2 2 1 1 1 1 10

Depreciation 241.67 733.33 125 75 13.33 416.67 7.92 $1,612.92

Variable power 235.15 481.33 161.47 71.21 28.24 49.73 27.87 $1,055

Suppliers 117.16 93.73 225.1 147.9 60.55 9.48 71.08 $725

% of sq feet 12.5% 30% 10% 7.5% 10% 20% 10% 100%

NOTE: sq feet % are related to the 80% of the building dedicated to production

Compute the gross margin for each product line using the combination of direct labor hours and machine hours to allocate overhead.

1. Do the results make sense with respect to Giulias belief about margins?

2. Do the results make sense with respect to current market conditions?