seligram circumstance solution essay

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Seligram, INC The Seligram, INCORPORATION. has offered electronic testing of various parts since 1983. One of 10 divisions in the company, Electronic digital Testing Procedures (ETO), has played a central part in the testing operations. Yet , technological progression of assessment and obsolete machines include challenged the companys prospect in the industry. The primary issue, inside the introduction with the new products, Seligram should find optimal system to control overhead cost.

Q2 (a) Single burden pool Cost of five components under existing system Merchandise Direct Labor$ Burden(DL*burden rate) Total cost(DL+ Burden) ICA $917 you, 329. sixty five $2, 247 ICB $2, 051 $2, 973. ninety five $5, 025 CAPACITOR $1, 094 $1, 586. 30 $2, 680 AMPLIFIER $525 $761. 25 $1, 286 DIODE $519 $752. fifty five $1, 272 Total $12, 510 (b) Two-burden pool area accounting managers proposal Elizabeth Burden Machine-hour Machine-burden Total Cost $183. 40 18. 5 $1, 480. 00 $2, 580. 40 $410. 20 $3, 200. 00 $5, 661. 20 $218. 80 several. 5 $600. 00 $1, 912. 85 $105. 00 5 $400. 00 $1, 030. u $103. 70 12 $960. 00 $1, 582. 80 $12, 767. 20 (c) Three burden pool consultants proposal Burden Main room-hour Mech. room-hour Test room burden Total cost almost 8. 5 15 $1, 664. 69 $2, 765. 2009 14 twenty six $335. 13 $6, 276. 34 3 4. five $696. 6 $2, 009. 66 four $365. 99 $995. 99 7 $1, 006. 53 $1, 629. 33 $13, 676. forty one The Seligram, INC. should consider consultants three-overhead-pool system. Even though cost of five components are not necessary less than costs of traditional system, multiple price pool possess clearly reveal additional price driver in ETO.

Two out of five components, while indicated in the chart, CADACITOR and AMPLIFIER, showed decrease in the overall costs. Also, further splits in overhead costs, Main Room and Mechanical expenses, decreased 67% of overhead cost of Cadacitor and 4% of overhead of Augmenter from costs of traditional approach. This kind of reductions claim that cost swimming pools have correctly traced to each testing actions. Yet, the company can blend cost regularly to improve being analysis. Two components, ICA and ICB, show that they consume one of the most labor several hours in both testing bedrooms.

In reality, expense analysis based on consults analysis, both costs increased 19% and twenty percent of the classic costing program. Both pieces illustrated time-consuming nature, however , the multiple cost regularly failed to reveal their illustrated nature. The overhead costs invested in direct labor costs have proved to be the right cost examination. In short, illustrated nature of activities may well not necessarily match the if, perhaps cost regularly in these pieces. Q5 The newest machine should think about as a separate cost middle.

The ETO is investment a huge amount of cash for one or two customers. The existing cost system transfers expense on some other clients and increase the price, and drive these people away. This is certainly unfair. We can see it evidently in the appendix. In tablel, the new machine drives the device rate much higher. In table2, the new machine rate dramatically varies in the first three years. It is unreasonable to simply put this burden to the are present burden, this could e demonstrated on table2 (column Total new main room rate).

Since the direct labor of new machine is somewhat more expensive, we could add this to the fresh hour charge. This can make the new price center easy to calculate. Provided that the machine hour and responsibility of the main area and the mech. Room will not likely change in 8 years, we ought to use an bundled rate covered three parts in new machine price pool. a) The quantity of devaluation, engineering need, and fixed area of the estimated WOW divided by the machine usage hour, b) variable section of the estimated WOW divided by machine usage hour c) DL expense per hour.

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