The cost system however assumes that all services consume overhead in a

The cost system however assumes that all services

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The cost system, however, assumes that all services consume overhead in a constant proportion to direct labor Alternative Cost Systems The Existing System The Cost Diagram Direct Labor Cost ($3,260,015) Indirect Labor Supplies Pers. Alloc. Salaries Services Svc. Labor Total Overhead ($4,713,982) Components Burden Rate = Total Overhead $ ÷ Direct Labor $ = 145% The Product Costs Direct Overhead Product Labor (145%) Total I.C. A $917 $1,330 $2,247 I.C. B $2,051 $2,974 $5,025 Capacitor $1,094 $1,586 $2,680 Amplifier $525 $761 $1,286 Diode $519 $753 $1,272
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Case Summary: Seligram 3 The Accountant’s System The Cost Diagram Direct Labor Cost ($3,260,015) Indirect Labor Supplies Pers. Alloc. Salaries Services Svc. Labor Directly Traced Admin & Tech ($684,603) Test Room ($4,029,379) Components Admin & Tech. $ ÷ Dir. Labor $ =20% Test Room $ ÷ Mach Hrs. (50,304)= $80 The Product Costs Direct Overhead Total Existing Product Labor (80/MH) (20% DL$) System I.C. A $917 $1,480 $183 $2,580 $2,247 I.C. B $2,051 $3,200 $410 $5,661 $5,025 Cap. $1,094 $600 $219 $1,913 $2,680 Amp. $525 $400 $ 105 $1,030 $1,286 Diode $519 $960 $104 $1,583 $1,272 The innovation in the accountant’s system is that it is a “two- stage” system. The first stage assigns or allocates costs from general overhead to cost pools that are more homogeneous in the way they use resources. Each cost pool then uses a different cost driver to allocate costs from the intermediate cost pool to the product.
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Case Summary: Seligram 4 The Consultant’s System Cost diagram Direct Labor Cost ($3,260,015) Indirect Labor Supplies Pers. Alloc. Salaries Services Svc. Labor Directly Traced Admin & Tech ($684,603) Main Test Room ($2,103,116) Mechanical Test Room ($1,926.263) Components Admin & Tech. $ ÷ Dir. Labor $ =20% Main Room $ ÷ Mach Hrs. (33,201)= $63 Mech. Room $ ÷ Mach Hrs. (17,103)= $113 The Product Costs Direct Overhead Product Labor ($63/MH) ($113/MH) (20% DL$) Total I.C. A $917 $536 $1,130 $183 $2,766 I.C. B $2,051 $882 $2,938 $410 $6,281 Cap. $1,094 $189 $509 $219 $2,011 Amp. $525 $252 $113 $105 $995 Diode $519 $441 $565 $104 $1,629
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  • Fall '16
  • Tanía Chavez
  • cost centers, EtO, Alternative Cost Systems

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