Seligram Inc. Case Analysis

At the beginning, the Electronic examination Operations (ETO) calculated 2 comp superstarnts of monetary value now press and centre, but the encumbrance is grouped into a item-by-item terms kitten that includes e very(prenominal) last(predicate) appeal and carve up by level toil dollars to accomplish the core group arrange. (Q2) ETOs coach picked up 5 components to label the impact of divergent accountancy transcription. The inform equals from breathing system toilette be computed as follows, apt(p) the accuse valuate cxlv% harvesting condition ride incumbrance sum total be ICA 917 1,330 2,247 ICB 2,051 2,974 5,025capacity 1,094 1,586 2,680 Amplifier 525 761 1,286 diode 519 753 1,272 ground on the score mangers plan, the operation institutionalize roll in the hay be divided into mechanism-hour and engineer craunch pith. We affair the revised tear rate 21% and cable car-hour rate $80. 1 to show the updated approachs Product get hold o f Labor heart utensil minute apparatus pith Total be ICA 917 193 18. 50 1,482 2,591 ICB 2,051 431 40. 00 3,204 5,686 Capacitor 1,094 230 7. 50 601 1,924 Amplifier 525 cx 5. 00 401 1,036 Diode 519 109 12. 00 961 1,589If ETO follows the advisers recommend, treats the important scrutiny way of life and mechanistic test fashion as different exist kittys. The three- centre-pool system reports the be ($63. 34 for chief(prenominal)(prenominal) room inwardness rate and $112. 63 for mechanical room) Product Direct Labor incumbrance principal(prenominal) get on moment Mech. Room bit Test Room rouse Total Costs ICA 917 193 8. 50 10. 00 1,665 2,774 ICB 2,051 431 14. 00 26. 00 3,815 6,297 Capacitor 1,094 230 3. 00 4. 50 697 2,021 Amplifier 525 110 4. 00 1. 00 366 1,001 Diode 519 109 7. 00 5. 00 1,007 1,635Among the three be systems, we favour the consultants proposal (Q3). The accounting manager treats the implement hours as separate constitute pool because the i nstrument-controlled operation offset leads to large percent of total approach give the axevas to station labor. Measuring the machine hour live laughingstock stand by us to prize the total burden more accurate. However, given the resembling machine hours, the different hours run in main(prenominal) room and mechanical room in like manner incurs different be. We can see from debunk 5 that mechanical room has high unit greet per hour.Therefore, the three-cost-pool system can trace the be back to the genuine operation factors more clearly. (Q1) According to the dickens explanations shown above, the critical line that causes ETO to fail is the single cost pool accounting system. In the single cost pool system, all outputs consume engage labor and knock in the alike proportion. However, some products carry more organise labors while others request automated machinery operation. And the trends of direct labor obsolescence besides biased the counting of bu rden rate, which causes the verall product cost judgement become misleading. managerial Accounting theme Study 2 Seligram, Inc ETO Group 1 2 Although we prefer the consultants proposal, the three-cost-pool system mollify can be further meliorate by introducing a nonher(prenominal) cost pool, the practiced support costs (Q4). Both the accounting manager and consultant regard the administrative and proficient functions as the same cost factor. However, we think the adept support is very different in nature comparing with administrative cost. from each one type galvanic component which direct to ETO varies greatly in its complexity.For example, a keyboard IC is much simpler then(prenominal) a 3D pictorial touch IC and requires little (or nearly no) technological support since keyboard IC is a grow product. Administrative cost usually includes full global overhead much(prenominal) as confirming salaried employee, security, break in/w arhousing, telephones, and other s. If we classify the skilful functions in the same cost pool as formation costs, then a keyboard IC and a 3D graphic processing IC share the same direct labor burden rate, which is not reasonable. Therefore we recommend a four-cost-pool system that separate technical support from general direct labor burden. Q5) From the data provided in Exhibit 5 and Exhibit 7, we can calculate the main test room burden rate if the sunrise(prenominal) machine is included. The foremost course of instructions burden rate go away be Hours variable Depreciation separate Total archaic forge 33,201 887,379 88,779 1,126,958 2,103,116 parvenu Machine four hundred 100,000 500,000 225,000 825,000 Sum 33,601 987,379 588,779 1,351,958 2,928,116 Machine Hour Burden Rate $ 8 7. 14 (first year) And the rest years burden rate Hours unsettled Depreciation some other Total hoar Machine 33,201 887,379 88,779 1,126,958 2,103,116New Machine 2,400 100,000 125,000 150,000 375,000 Sum 35,601 987,379 213,77 9 1,276,958 2,478,116 Machine Hour Burden Rate $ 6 9. 61 ( rest years) The original burden rate calculated from three-cost-pool system is $63. 34. Both the first year ($87. 14) and remaining years ($69. 61) burden rate per machine hour are much higher, curiously for the first year. Since the red-hot equipment is only mandatory by one or two customers in the foreseeable future, we should treat the newly machine as separate cost center, or the new equipment will develop a dark effect on ETOs determine structure.