Seligram Incorporations (Electronic testing operations)

I.Description of the existing be carcassThe existing exist dodging of ETO is very simple. ETO stands for a damage subject matter which concerns the entire division. This cost center is divided in two cost components: let in labour party and allocated perfume. Direct labor cost for all(prenominal) type of corporation are traced take aimly to the proceedss whereas burden is the however one cost pool. The burden cost includes costs tie in to each of the interrogation rooms, engineering costs and administrative costs. stir up costs are divided by the sum of prepare labor which allows us to calculate the burden straddle. Indeed, according to the calculations, the burden rate is be to: (Total burden $ / Direct labor $) x 100 = ($4,713,982 / 3260,015) x 100 = cxlv%. The existing cost system squeeze out be represented by the following diagram: computer science of burden rate for the existing cost system:Burden rateTotal burden costs$4.713.982,0Total direct labor do llars$3.260.015,0=4.713982,0/3.260.015,0*100=144,6% powerful rate =145%Why does the existing cost system fail?This system was based on the fact that direct costs and crash are required in the same similarity for all product testing. However, the three following reasons show that it is no longer the case. Firstly, collectible to the implementation of the vendor certification and the Just-in-time delivery, some products are already tested and do not need any pull ahead tests.

There are so not concerned by the allocation of costs and ETO will event a lessen number of tests. Then, the firm faces outsourcing, tha t is to say a movement from direct towards t! o indirect cost. This newfound trend leads to a decrease in direct costs and to an increase in indirect costs. Lastly, new components are requiring more and more postgraduate technology tests. They consume highly automated equipment and require diametric testing procedures compared to different products. ETO will need less and less... If you pauperization to get a full essay, order it on our website: OrderCustomPaper.com

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