Accounting Case Essay

Satisfactory Essays
Seligram, Inc.: Electronic Testing Operations

1. What caused the existing system at ETO to fail?

2. Calculate the reported cost of the five components listed in Exhibit 6 using:

a. The existing system.

b. The system proposed by the accounting manager.

c. The system proposed by the consultant.

3. Which system is preferable? Why?

4. Would you recommend any changes to the system you prefer? Why?

5. Would you treat the new machine as a separate cost center or as a part of the main test room?

Bridgeton Industries: Automotive Component & Fabrication Plant

1. The official overhead allocation rate used in the 1987 model year strategy study at the Automotive Component and Fabrication Plant (ACF) was 435% of direct
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(2) if the manifold product line is dropped.

Explain any additional assumptions you make in preparing your estimated model year budgets.

b. What will be the overhead allocation rate under the two scenarios?

6. Would you outsource manifolds from the ACF in 1991? Why, or why not? What more information would you want before reaching a final decision?

Destin Brass Products Co.

1. Use the Overhead Cost Activity Analysis in Exhibit 5 and other data on manufacturing costs to estimate product costs for valves, pumps, and flow controllers.

2. Compare the estimated costs you calculate to existing standard unit costs (Exhibit 3) and the revised unit costs (Exhibit 4). What causes the different product costing methods to produce such different results?

3. What are the strategic implications of your analysis? Could the production process for flow controllers be changed in such a way to allow Destin Brass Products to reduce the unit cost of flow controllers? How would the change in the lot size for flow controller production affect unit costs? Has Destin Brass Products adopted the most profitable distribution system in the flow controller market? What actions would you recommend to managers at Destin Brass Products Company?

4. Assume that the interest in a new basis for cost accounting at Destin Brass Products remains high. In the following month, quantities produced and sold, activities, and costs were
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