What new insights does the new cost system provide Product Direct Labor

What new insights does the new cost system provide

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What new insights does the new cost system provide? Product Direct Labor $ Overhead (DL) Total Machine hours Overhead (Machine hours) Cost ($) ICA 917 18.5 ICB 2,051 40 Capacitor 1,094 7.5 Amplifier 525 5 Diode 519 12
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18 Two Cost Pool System Since we now use machine hours as a cost driver, costs go up for… go down for…
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19 Three Cost Pool System How can we further improve the accounting system?
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20 Three Cost Pool System Overhead costs Admin & Technical $685k Component Lot $685k Direct labor dollars Mech test room $1,926k $1,926k 17k Directly traced Directly traced Machine hours $3,260k Main test room $2,103k Directly traced $2,103k 33k Machine hours =0.2 =63.73 =113.29
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21 Three Cost Pool System Product Direct Labor $ Overhead (DL) Main room Hours Overhead (Main room hours) Mech Room Hours Overhead (Mech room hours) Cost ($) ICA 917 183 8.5 536 10 1130 2,766 ICB 2051 410 14 882 26 2938 6,281 Capacitor 1094 219 3 189 4.5 509 2,011 Amplifier 525 105 4 252 1 113 995 Diode 519 104 7 441 5 565 1,629 Cost = DL$ + 0.2*DL + 63*Main Room Hours + 113*Mech. Room Hours What new insights are provided by this new cost system?
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22 Three Cost Pool System Cost allocation rate is 113 per machine hour for the mechanical room 64 per machine hour for the main test room Mechanical testing more expensive than electrical testing
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23 Comparing Product Costs Product Single cost pool Two cost pools Three cost pools ICA 2247 2580 2766 ICB 5025 5661 6281 Capacitor 2680 1913 2011 Amplifier 1286 1030 995 Diode 1272 1583 1629
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24 Comparing the Cost SystemsAre the new product costs more accurate than the old ones?
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25 New Machine ETO is thinking about buying a new machine New machine is useful only for 1 or 2 customers Will be located in the main test room Should the new machine be a separate cost pool? or part of the main test room?
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26 Separate Cost Pool Overhead cost rate for new machine Variable Depreciation Other Total YEAR 1 Machine costs Machine hours Burden rate per machine hours 100,000 400 $250
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