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

# The cost system however assumes that all services

• Notes
• 6
• 100% (2) 2 out of 2 people found this document helpful

This preview shows page 2 - 5 out of 6 pages.

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
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.
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

#### You've reached the end of your free preview.

Want to read all 6 pages?

• Fall '16
• Tanía Chavez
• cost centers, EtO, Alternative Cost Systems