Seligram, Inc.: Electronic Testing Operations Case Analysis Essay

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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 …show more content…
urden rate proposed by accounting manager | Total Burden (administrating and technical functions) | $684,603 | Total Direct labor hours | $3,260,015 | Effective Rate for 1st cost pool* | 21% | *Effective Rate = total burden/ total direct labor hours multiplied by 100

Burden rate for 2nd and 3rd cost pools (information found in Exhibit 5) | | | | Main Test Room | $2,103,116 | | Mechanical test room | $1,926,263 | | Machine hours in the main test room | 33,201 | | Machine hours in the mechanical test room | 17,103 | | | | | Burden rate for main test room | $63 | 2nd cost pool | (2,103,116/33,201) | | | Burden rate for mechanical test room | $113 | 3rd cost pool | (1,926,263/17,103) | | | Product | ICA | ICB | Capacitor | Amplifier | Diode | Total | Direct Labor | $917 | $2,051 | $1,094 | $525 | $519 | $5,106 | administrating and technical functions cost (21%) | $192.57 | $430.71 | $229.74 | $110.25 | $108.99 | $1,072.26 | machine hours needed in main test room | 8.5 | 14 | 3 | 4 | 7 | 36.5 | machine hours needed in mechanical test room | 10 | 26 | 4.5 | 1 | 5 | 46.5 | Burden main test room ($63/hour)* | $535.50 | $882.00 | $189.00 | $252.00 | $441.00 | $2,299.50 | * (machine hours needed in main room * $63) | | | | | | | Burden mechanical test room ($113/hour)* | $1,130.00 | $2,938.00 | $508.50 | $113.00 | $565.00 | $5,254.50 |
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