Seligram case solution

Seligram, INC

The Seligram, INC. has provided electronic testing of various components since 1983. One of 11 divisions of the company, Electronic Testing Operations (ETO), has played a central role in the testing operations. However, technological advancement of testing and outdated machines have challenged the company’s prospect in the industry. The main issue, in the introduction of the new equipment, Seligram needs to find optimal system to control overhead cost.
Q2
(a) Single burden pool
Cost of five components under existing system
Product
Direct Labor$
Burden(DL*burden rate)
Total cost(DL+ Burden)
ICA
$917
$1,329.65
$2,247
ICB
$2,051
$2,973.95
$5,025
CAPACITOR
$1,094
$1,586.30
$2,680
AMPLIFIER
$525
$761.25
$1,286
DIODE
$519
$752.55
$1,272
Total

$12,510

(b) Two-burden pool accounting manager's proposal
Product
Direct Labor$
E&A Burden
Machine-hour
Machine-burden
Total Cost
ICA
$917
$183.40
18.5
$1,480.00
$2,580.40
ICB
$2,051
$410.20
40
$3,200.00
$5,661.20
CAPACITOR
$1,094
$218.80
7.5
$600.00
$1,912.80
AMPLIFIER
$525
$105.00
5
$400.00
$1,030.00
DIODE
$519
$103.80
12
$960.00
$1,582.80
Total

$12,767.20

(c) Three burden pool consultant's proposal
Product
Direct Labor$
E&A
Burden
Main room-hour
Mech. room-hour
Test room burden
Total cost

ICA
$917
$183.40
8.5
10
$1,664.69
$2,765.09
ICB
$2,051
$410.20
14
26
$3,815.14
$6,276.34
CAPACITOR
$1,094
$218.80
3
4.5
$696.86
$2,009.66
AMPLIFIER
$525
$105.00
4
1
$365.99
$995.99
DIODE
$519
$103.80
7
5
$1,006.53
$1,629.33
Total

$13,676.41
Q4
The Seligram, INC. should consider consultant’s three-overhead-pool system. Though cost of five components are not necessary lower than costs of traditional system, multiple cost pool have clearly reflect additional cost driver in ETO. Two out of five