Shun Electronics Case Essay examples

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INTRODUCTION

Shun Electronics Company is a medium-sized firm with in the Malaysian electronics industry. Currently there are two operating divisions, the KB Monitor division which manufactures computer monitors, and the KL Radio division which makes radios.

For this case, we will be presenting the side from the KL Radio division. The KL Radio division currently makes two basic radios- a shelf model and a portable model. Each of these models is available in three different versions; a bathroom shower version, a 1950’s metal style cabinet version, and a wooden cabinet version. Altogether there are 6 radios being produced at the company.

The current production process can be seen in three departments, assembly, fabrication and
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Overhead costs rates are revised annually but the standard for direct labor and material are only changed when prices, production methods or production designed are changed significantly.

However, an employee of Shun, Manjit, has decided to change the method in which Shun Electronics calculates its costs of its products. Manjit wants to expand the three departmental cost centers to eight, each with its own overhead cost allocation rate. As a result, it appears that the total costs for four of their six radios will increase, while two will decrease. This poses a great deal of issues concerning Shun Electronics:
• Standard cost of product change
• Longer-run functions such as price change, make/buy decisions, financial planning and corporate management evaluation divisional performance are altered significantly
• This new costing method may change current incentives of managers
• Profit margins for some products decreased while others increased

This poses us with three alternatives we can take for Shun Electronics:
1. Continue on with our current cost model
2. Adopt Manjit’s cost model
3. Alter Manjits model and compute new numbers
FIRST ALTERNATIVE
1. Continue on with our current cost model

With our old model, we will be able to continue onwards with our production. However, this poses some serious problems for our product
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