Case Study Op Management Weight Solutions

MANAGEMENT ACCOUNTING

(course nr 1202)

(1ST short case study – Fall 2013/2014) Mandatory

Report to be prepared in group and delivered until 5 pm 1 of 7 Oct, 2013 in Moodle

Note: Do not forget to write the names of all the students (4) that compose the group in the front page of your report, which must not surpass 3 pages in total (appendices included) The Engine Company The Engine Co manufactures customized engines for electric power generating plants. The company has 2 production cost centres, Machining and Assembly, and 2 service cost centres, Plant/Equipment Maintenance and Material Handling. In May 2013, the manufacturing overheads assigned to the production and service cost centres, as well as the usage of the services provided by the latter, were as follows:

Production centres

Machining 400.000 €

Service centres

Material Handling 120.000 €

Manufacturing overhead costs Service center work provided: by Plant Maintenance: In labor-hours in % By Material Handling in labor-hours in %

Plant/Equipm Assembly Maintenance 200.000 € 600.000 €

Total Costs

1.320.000 €

2400 30% 1600 80%

4000 50% 200 10%

200 10%

1600 20%

8.000 100% 2.000 100%

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The Engine Co has been using the direct allocation method to reallocate the costs of the service centres to the production centres with the following outcome for May 2013:

Direct alloc method (in 000 €) Manufacturing overhead costs directly assigned Reallocation of costs of svc centres: P/E Maintenance (3/8, 5/8) Material Handling (8/9, 1/9) Total

1

Production centres Machining 400.000 € Assembly 200.000 €

Service centres Plant/Equip Mat. Maintenance Handling 600.000 € 120.000 €

Total Costs 1.320.000 €

225.000 € 106.667 € 731.667 €

375.000 € 13.333 € 588.333 € 0€ 0€ 1.320.000 €

With 15 minutes tolerance.

MANAGEMENT ACCOUNTING

(course nr 1202)

Moreover, the total overhead costs of each production centre have been assigned to individual products based on...