Activity-Based Costing Objectives
- Computation of product costs using ABC
- Understand the role of judgment: how are cost pools and cost drivers determined?
- Link cost data to strategic choices Game Plan & Class Pedagogy Case discussion. Reading Assignment CP: Siemens Electric Motor Works Class Preparation Questions Focus your group’s attention on the qualitative questions (1 -6). Attempt to answer questions 7 and 8 before coming to class, but don’t invest excessive time on this task, as we will work through the computational issues together in class.
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Thinking about the issues and the costing approaches should take precedence over “getting the right numbers. ”
- What were the competitive conditions facing EMW in the late 1970s?
- What change in strategy did EMW’s managers undertake in response to these conditions?
- How did EMW’s new strategy change the way products were manufactured?
- Describe the 1970s costing system at EMW.
- Describe the 1980s costing system (PROKASTA) at EMW.
- How do the two systems differ in their treatment of costs for order processing and special components?
- Calculate the cost of the five orders in Exhibit 4 under the traditional and PROKASTA cost systems. Hint: first compute the PROKASTA costs of processing an order and handling a special component
- Compare traditionally and PROKASTA costs for Motor A in Exhibit 4 if 1 unit, 10 units, 20 units, or 100 units are ordered.
- If you were a manager at EMW, how might you use the new cost system to make better
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