Exhibit 1: Product Profitability Analysis Guitars Bass guitarss Drums Standard Unit Cost $1032.72 $1765.43 $1626.35 Target Selling Price $1600.71 $2736.42 $2520.84 Planned Gross margin % 35% 35% 35% Last Month: Actually Selling price Actual Gross Margin $1580.00 35% $2300.00 $2800.00 23% 42% Product Lines Monthly production Exhibit 2: Monthly Production and Cost Summary Guitars Bass Guitars Drums 300 units 500 units 200 units 1 runs 5 runs 500 units Monthly shipments 300 units 1 shipments 7 shipments Material and Labor Costs Material 10 runs 200 units 22 shipments Monthly Total 6 components 4 components 10 components 3 @ $20 $60 3 @ $50 $150 2 @ $20 $40 2 @ $40 $80 4 @ $10 = $40 5 @ $6 = $30 Total $210 $120 1 @ $240 = $240 $310 $185,000 Labor ($16 per hour) Set-up Labor Direct Labor Machine Hours 10 hours per production run 25 hours per unit 10 hours per unit 10 hours per production run 50 hours per unit 10 hours per unit 24 hours per production run 300 hours 40 hours per unit 5 hours per unit 40,500 hours 9,000 hours Manufacturing Overhead Receiving $20,000 Materials handling $200,000 Engineering $100,000 Packing and $60,000 Shipping Maintenance $30,000 Machine $270,000 Depreciation (10 year life) Total $680,000 Exhibit 3: Monthly Overhead Activity Analysis Guitars Bass Guitars Drums Total Receiving: Receive each component once per 12 Transactions 75 Transactions 300 Transactions 387 Transactions run Materials Handling: Handle each component 12 Transactions 75 Transactions 300 Transactions 387 Transactions Packing and Shipping: One packing order per shipment 3 Transactions 21 Transactions 66 Transactions 90 Transactions Engineering: Estimated engineering workload 20% 30% 50% 100% percentage (subjective) Maintenance and Depreciation Machine hours basis 3,000 Hours 5,000 Hours 1,000 Hours 9,000 Hours