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Seligram Case

In: Business and Management

Submitted By trangphung93
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Trang Phung
MPA 527
Professor Duran
Seligram Case

1. What caused the existing accounting system at ETO to fail? * It is because of the single cost pool accounting system. * In the single cost pool system, all products consume direct labor and overhead in the same proportion. However, some products need more DL whiles other requires more automated machinery operation. * The trends of DL obsolescence also biased the calculation of burden rate, which causes the overall product costs assessment become misleading.

2. Calculate the reported costs of the five components described in the case using: a. The existing system- burden rate = 145%
Burden rate 145% = Total Burden $/ DL$ * Burden$ = 145% x DL$ Product | DL$ | Burden$ | Total Costs | ICA | 917 | 1330 | 2247 | ICB | 2051 | 2974 | 5025 | Capacitor | 1094 | 1586 | 2680 | Amplifier | 525 | 761 | 1286 | Diode | 519 | 1272 | 1272 |

b. The system proposed by the accounting manager- burden would be directly traced to two cost pools: machine-hour (machine-hour rate = $80.10) and DL burden (burden rate = 21%)
Burden rate 21% = Total Burden $/ DL$ * Burden$ = 21% x DL$
Machine-Hour rate = Machine burden$/ Machine hours * Machine burden$ = Machine hours x Machine-hour rate Product | DL$ | Burden$ | Machine Hour | Machine Burden$ | Total Costs | | ICA | 917 | 193 | 18.5 | 1482 | 2591 | | ICB | 2051 | 431 | 40.0 | 3204 | 5686 | | Capacitor | 1094 | 230 | 7.5 | 601 | 1924 | | Amplifier | 525 | 110 | 5.0 | 401 | 1036 | | Diode | 519 | 109 | 12.0 | 961 | 1589 | |

c. The system proposed by the consultant- three-burden-pool system, treats the main test room (burden rate = $63.34) and mechanical test room as different cost pools (burden rate = $112.63).
Test room Burden$ = (Main Room hour x main room burden rate) +...

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