Shweta Kale Section - B 2019PGP401 Siemens Electric Motor Works
Shweta Kale Section - B 2019PGP401 Siemens Electric Motor Works
Shweta Kale Section - B 2019PGP401 Siemens Electric Motor Works
Section - B
2019PGP401
a. What are the reported costs of five orders under a new system per unit? What are the reported
expenses of five rules under the Old System per unit? Why are the costs per unit different under
those systems?
A B C D E
Cost of base motor 295 295 295 295 295
Cost of all special 29.5 59 88.5 147.5 295
components
Number of different type of 1 2 3 5 10
special
components
Number of motors 1 1 1 1 1
ordered
Material 90
Material OH 5
Direct Labor 35
Manufacturing OH 110
Cost of Base Motor 240
Pre-Prokasta support related 55
overhead
Pre-Prokasta 295
Cost of special Components
Material 9
Material OH 0.5
Direct Labor 3.5
Manufacturing OH 11.0
Cost Of special Components 24.0
Pre-Prokasta support related 5.5
overhead
Pre-Prokasta 29.5
Traditional Method
ProKasta Costing
Special Products
Total cost
Difference in cost
Cost in Prokasta minus Traditional method
• Old system included flat rate costing which led to costs being flat even though the
ordered number of units varied
• It failed to find relationship between change in mix of products and the increased
support costs
• In the old system processing costs were buried under supporting costs and there was
a clear case of under costing
• In new system support cost is driven by special component cost and order processing
cost and minimizes the cost by allocating overhead burden on motors overall. This
method more accurately demonstrates the actual cost of each order.