Diode 24 inc 3 inc 28 seligram inc 27 how much more

Diode 24% inc. 3% inc. 28%

Seligram, Inc. 27
How much more accurate?
ratios of costs under different
designs
2-pool /
1-pool
3-
pool /
2-pool
3-pool /
1-pool
Absolute
change
16.8%
inc.
4.6%
inc.
20.3%
inc.

Seligram, Inc. 28
Activity-based costing
•
One-pool: “Plant” overhead
rate
(see p.331 [
317
])
•
2- and 3-pool: “Department”
rate
(see p.331-332 [
317-318
])
–
These systems are both
“volume related”
(see p.337 [
323
])
✓

Seligram, Inc. 29
Strategy
•
A firm whose strategy is to support
a full-line of products will face
the threat of cross-subsidization
with associated pricing distortions
that can drive away customers.
•
A single-line producer of simple
tests, or a “niche” player, will be
much less subject to cross-
subsidization.

Seligram, Inc. 30
Strategy
•
A tester which sells its product in
a market where price is a primary
factor in the purchase decision
must worry much more about cross-
subsidization than ...
•
A tester who sells testing services
to customers who value highly:
–
Responsiveness (develop new
software, etc.)
–
Speed
–
Quality

Seligram, Inc. 31
“Accounting” summary
•
Indirect resources should be assigned
by the cost system to the activities
that create a demand for them.
•
The “cost driver” is the event that
consumes indirect resources.
•
Cross-subsidization occurs when costs
are assigned by the cost system to
products that did not consume them.

Seligram, Inc. 32
“Business” summary
•
Cost systems can become obsolete
due to changes in technology.
•
Cost system failure can cause
subtle, unintended shifts in
strategy.
•
Symptoms of cost system failure
are not obvious or easy to
detect.