Seligram

Managerial Accounting Case Study 2: Seligram, Inc: ETO 96122050 96122051 96122052 96122073 96122085 96122088 96122092

Group 1

At the beginning, the Electronic Testing Operations (ETO) measured two components of cost: direct labor and burden, but the burden is grouped into a single cost pool that includes all costs and divided by direct labor dollars to obtain the burden rate. (Q2) ETO’s manager picked up 5 components to evaluate the impact of different accounting system. The reported costs from existing system can be computed as follows, given the burden rate 145%:

Product ICA ICB Capacitor Amplifier Diode Direct Labor 917 2,051 1,094 525 519 Burden 1,330 2,974 1,586 761 753 Total Costs 2,247 5,025 2,680 1,286 1,272

Based on the accounting manger’s proposal, the operation burden can be divided into machine-hour and direct labor burden. We use the revised burden rate 21% and machine-hour rate $80.1 to show the updated costs:

Product ICA ICB Capacitor Amplifier Diode Direct Labor 917 2,051 1,094 525 519 Burden 193 431 230 110 109 Machine Hour 18.50 40.00 7.50 5.00 12.00 Machine Burden 1,482 3,204 601 401 961 Total Costs 2,591 5,686 1,924 1,036 1,589

If ETO follows the consultant’s recommend, treats the main test room and mechanical test room as different cost pools. The three-burden-pool system reports the cost: ($63.34 for main room burden rate and $112.63 for mechanical room)

Product ICA ICB Capacitor Amplifier Diode Direct Labor 917 2,051 1,094 525 519 Burden 193 431 230 110 109 Main Room Mech. Test Room Hour Room Hour Burden 8.50 10.00 1,665 14.00 26.00 3,815 3.00 4.50 697 4.00 1.00 366 7.00 5.00 1,007 Total Costs 2,774 6,297 2,021 1,001 1,635

Among the three costing systems, we prefer the consultant’s proposal (Q3). The accounting manager treats the machine hours as separate cost pool because the automated operation process leads to large percentage of total cost comparing to direct labor. Measuring the machine hour costs can help us to assess...