Seligram Incorporations (Electronic testing operations)

I.Description of the existing be carcassThe existing represent form of ETO is very simple. ETO stands for a make up subject matter which concerns the entire division. This cost center is divided in two cost components: convey labour party and allocated freight. Direct labor cost for each type of corporation are traced cultivately to the returns whereas burden is the only when one cost pool. The burden cost includes costs link to each of the interrogation rooms, engineering costs and administrative costs. wind up costs are divided by the sum of verbatim labor which allows us to calculate the burden reckon. Indeed, according to the calculations, the burden rate is be to: (Total burden $ / Direct labor $) x 100 = ($4,713,982 / 3260,015) x 100 = cxlv%. The existing cost system squeeze out be represented by the following diagram: computer science of burden rate for the existing cost system:Burden rateTotal burden costs$4.713.982,0Total direct labor dollars$3.260. 015,0=4.713982,0/3.260.015,0*100=144,6% powerful rate =145%Why does the existing cost system fail?This system was based on the fact that direct costs and smash-up are choosed in the same similarity for all product testing. However, the three following reasons show that it is no longer the case. Firstly, overdue to the implementation of the vendor certification and the Just-in-time delivery, some products are already tested and do not need any however tests.

There are so not concerned by the allocation of costs and ETO will event a decrease number of tests. Then, the firm faces outsourcing, that is to say a movement from direct towards to indirect cost. This reinvigorated trend lead s to a decrease in direct costs and to an in! crease in indirect costs. Lastly, new components are requiring more and more postgraduate technology tests. They consume highly automated equipment and require diametric testing procedures compared to otherwise products. ETO will need less and less... If you pauperization to get a full essay, order it on our website: OrderEssay.net

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