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Group 5 Section C Anubhav Tiwary Deepankur Malhotra Mithun Madhusudan Saurabh Singh Siddharth Agarwal
Background
Huron Automotive Company
Selected vehicle parts supplier Competed on basis of price Focus on small volume parts Five production departments
Grinding Machining
Proposed systems
Proposal 1
Department wise hourly costing rate Labor hours and payroll costs
Proposal 2
Based on normal volume of five departments over the course of the year
Normal
volume
estimated
by
Labor
cost
same
under
two
heating costs
First proposal
Casting / Stamping Grinding Machining Assembly
Revised proposal
Casting / Stamping Grinding Machining Assembly
proportional to all the work plant wide Jobs could be overvalued based on resources they consume Cross subsidization between
for which there is only a slight difference (5% for assembly and 2% for machining) in calculated rates System 1 uses July actual, while system 2 uses estimated rates based on normal volume. Actual cost differences between systems will depend on the variance in volumes across months. Since system 2 uses estimated rates for a fixed business cycle, it provides a more stable pricing basis
departments, however total production costs will remain the same irrespective
helps determine exact cost of each product, division can continue to produce loss
actual costs of jobs/margins of jobs. Does not imply that only certain jobs will start showing
products
losses
Thank You