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In the manufacturing cycle, thousands of dollars could be saved due to the Increased repair costs farther down the line In the manufacturing cycle. Secondly, a large amount of work Is defense related. Naval and aerospace products have required extensive testing of components specifications. Performs both electrical and mechanical testing. Teat’s testing faculty Is Into two rooms, the man testing room (used for electrical testing) and the mechanical room (used for mechanical testing). The existing system’s cost accounting system Is based on direct labor and burden.
Burden Is grouped Into one single cost pool. Several trends in technology and the marketplace caused this cost accounting system to fail. There were three main trends that contributed to this failure. Firstly, direct labor hours per lot testing had been steadily decreasing over the past few years due to the increased popularity of Just-in-Time OUT) delivery. A key component of KIT is vender certification which requires the suppliers to do primary testing of components before reaching . This reduced the number of tests needed to be performed by .
Secondly, there was a shift from simple inspection services to broader-based test technology. Was cheaper compared to outside sources with regards to the testing that was complex and required engineering support; however, was more expensive when only elementary testing was needed. In this instance, it would be more cost effective for customers to move toward outside laboratories. Lastly, the need for more automatic testing, longer test cycles, and more data per part was ended after the introduction of high-technology components.
This increase in automation would lead to a smaller base of direct labor to absorb the depreciation costs of new equipment. Because of these trends that have led to the failure of the existing system, the division’s accounting manager and a consultant hired by corporate management proposed two different cost accounting systems to Improve the company’s efficiency and profits. Exhibit I(page 4) details specific costs among the exiting cost accounting system, the accounting manager’s proposed cost accounting system, and the consultant’s proposed cost accounting system.
Based on our calculations in Exhibit 1 (page 4), the cost accounting system proposed by the consultant Is preferred over the existing and the account manager’s proposed cost accounting systems. The three-burden-pool system separate burden centers for each test room and a common technical/ pool breaks down all the costs more accurately and efficiently. This calculates costs that are more accurate and exact to be charged to the customer. s important for two main reasons.
Firstly, if defective components are detected early in the manufacturing cycle, thousands of dollars could be saved due to the increased repair costs farther down the line in the manufacturing cycle. Secondly, a large amount of work is defense related. Naval and aerospace products have electrical and mechanical testing. Teat’s testing facility is divided into two rooms, the main testing room (used for electrical testing) and the mechanical room (used for mechanical testing).
The existing system’s cost accounting system is based on direct labor and burden. Burden is grouped into one single cost pool. Several trends corporate management proposed two different cost accounting systems to improve the company’s efficiency and profits. Exhibit I(page 4) details specific costs consultant is preferred over the existing and the account manager’s proposed cost accounting systems.