Exhibit 2 Model Year Budgets for the ACF ($ 000)
	MODEL YEAR
	1987	1988	1989	1990
Sales
Fuel Tanks	$70,278	$75,196	$79,816	$83,535
Manifolds	79,459	84,776	89,323	93,120
Doors	41,845	45,174	47,199	49,887
Muffler/Exhausts	62,986	66,266	0	0
Oil Pans	75,586	79,658	0	0
Total	$330,154	$351,071	$216,338	$226,542
Direct Material
Fuel Tanks	$15,125	$15,756	$16,312	$16,996
Manifolds	31,696	33,016	34,392	35,725
Doors	14,886	15,506	16,252	16,825
Muffler/Exhausts	28,440	29,525	0	0
Oil Pans	32,218	33,560	0	0
Total	$122,365	$127,363	$66,956	$69,546
Direct Labor
Fuel Tanks	$4,169	$4,238	$4,415	$4,599
Manifolds	5,886	6,027	6,278	6,540
Doors	2,621	2,731	2,844	2,963
Muffler/Exhausts	5,635	5,766	0	0
Oil Pans	6,371	6,532	0	0
Total	$24,682	$25,294	$13,537	$14,102
Overhead by Account Number
1000	$7,713	$7,806	$5,572	$5,679
1500	6,743	6,824	5,883	5,928
2000	3,642	3,794	2,031	2,115
3000	2,428	2,529	1,354	1,410
4000	8,817	8,888	7,360	7,433
5000	24,181	24,460	20,063	20,274
8000	5,964	5,946	3,744	3,744
9000	6,708	6,771	5,948	5,987
11000	5,089	5,011	3,150	3,030
12000	26,936	28,077	15,027	15,683
14000	9,733	9,784	8,025	8,110
Total	$107,954	$109,890	$78,157	$79,393
Factory Profit	$75,153	$88,524	$57,688	$63,501
Sales		106%	66%	69%
Direct Materials		104%	55%	57%
Direct Labor		102%	55%	57%
		106%	66%	69%
	1000	101%	72%	74%	1000	$ 1.10
	1500	101%	87%	88%	1500	$ 1.33
	2000	104%	56%	58%	2000	$ 0.85
	3000	104%	56%	58%	3000	$ 0.85
	4000	101%	83%	84%	4000	$ 1.27
	5000	101%	83%	84%	5000	$ 1.27
	8000	100%	63%	63%	8000	$ 0.96
	9000	101%	89%	89%	9000	$ 1.35
	11000	98%	62%	60%	11000	$ 0.94
	12000	104%	56%	58%	12000	$ 0.85
	14000	101%	82%	83%	14000	$ 1.26

5 Assume that selling prices, volumes, and materials costs for the 1991 model year will not change for fuel tanks and doors produced by the ACF of Bridgeton Industries. Assume also that if manifolds are produced, their selling prices, volume, direct labor, and materials will not change either. A Prepare an estimated model year budget for the ACF in 1991 1 If no additional products are dropped 2 If the manifold product line is dropped.

Explain any additional assumptions you make in preparing your estimated model year budgets.

B What will be the overhead allocation rate under the two scenarios?

6 Would you outsource manifolds from the ACF in 1991? Why or why not? If you could get more COST information before making a decision, what information would you want? (This is not a marketing course)