Seligram, Inc.: Electronic Testing Operations Case Analysis Essay

2148 Words Nov 5th, 2012 9 Pages
ETO Case Study Analysis

Seligram Incorporation, Electric Testing Operations (ETO) previously measured two components of cost: direct labor and manufacturing overhead. The existing cost system is very simple. Burden was grouped into a single cost pool that was combined with each of the testing rooms as well as the engineering burden costs related to software and tooling development and the administrating costs of the department. The total burden costs was then divided by the sum of testing and engineering labor dollars to obtain the burden rate per direct labor dollar. Burden was then calculated by multiplying 145% of the burden rate by the actual direct labor hours related with the lots. ETO added the computed burden to the actual
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Cost System proposed by the consultant
The consultant proposed a plan that would trace burden to three cost pools. The first pool would include burden related to the administrative and technical functions and would allocate costs per direct labor dollar. The second pool would contain burden assigned to the main test room and would be based on machine hours. The third pool would contain the burden allocated to the mechanical test room and would also be allocated

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