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Reported Costs Under The Old System:: Siemens EMW Case

The document discusses reported costs under Siemens' old and new cost accounting systems. Under the old system, 33.3 million in support overhead costs were allocated based on a ratio of total support costs to applied support costs. Under the new system, overhead costs were directly traced to specific products, resulting in considerably different reported product costs compared to the old system. EMW executives believed the new system better aided their strategic decision making.

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Kshitiz Goel
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68 views2 pages

Reported Costs Under The Old System:: Siemens EMW Case

The document discusses reported costs under Siemens' old and new cost accounting systems. Under the old system, 33.3 million in support overhead costs were allocated based on a ratio of total support costs to applied support costs. Under the new system, overhead costs were directly traced to specific products, resulting in considerably different reported product costs compared to the old system. EMW executives believed the new system better aided their strategic decision making.

Uploaded by

Kshitiz Goel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Siemens

Reported costs under the old system:

From Exhibit 2, all the revised costs come from the support related overhead categories:
6,300,000 from engineering costs, and 27,000,000 from administrative costs.
In order to calculate the traditional cost system costs, the support related overhead reported in Exhibit 2, based

94,500,000 total support/61,200,000 applied = 1.54.

A B C
Pre-support related
overhead costs
Base Motor 247.0 247.0 247.0
Components 32.2 64.4 96.6
Pre-PROKASTA
Support Overhead 57 + 7.4 57 + 2*7.4 57 + 3*7.4
64.4 71.8 79.2
1.54 1.54 1.54
99.2 110.6 122.0
Total 378.4 422.0 465.6

Reported costs under the new system:

A B C
Base Motor 304.0 304.0 304.0
Components 39.6 79.2 118.8
Order Processing 210.0 210.0 210.0
Component Handling 60.0 120.0 180.0
Total 613.6 713.2 812.8

EMW executives believed the system aided in the implementation of their new strategy and influen
way they made decisions, especially when deciding which orders to accept and which to reject. Eve
the relocated costs only account for 9% of total costs, allocating them under a different system resu
considerable change in reported product costs.
Siemens EMW Case

reported in Exhibit 2, based on cost to date, must be grossed up to reflect these costs:

D E

247.0 247.0
161.0 322.0

57 + 5*7.4 57 + 10*7.4
94.0 131.0
1.54 1.54
144.8 201.7
552.8 770.7

D E
304.0 304.0
198.0 396.0
210.0 210.0
300.0 600.0
1012.0 1510.0

heir new strategy and influenced the


ept and which to reject. Even though
nder a different system resulted in a
costs.

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