Seligram, Inc. Electronic Testing Operations Essay

2765 Words Dec 24th, 2013 12 Pages
Rev. April 28, 1993

Seligram, Inc.: Electronic Testing Operations

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We put in a piece of automated equipment a year ago that only fits the requirements of one customer. This equipment reduced the direct labor required to test his components and, because of our labor-based burden allocation system, substantially reduced his costs. But putting a $40,000 machine into the general burden pool raised the costs to our other customers. It just doesn’t make sense shooting yourself in the foot at the same time you are lowering the company’s cost of operations.
Paul Carte, Manager

Introduction

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Electronic Testing Operations (ETO), a division of Seligram, Inc., provided centralized testing for electronic components such
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Software, tools, and fixtures were developed by the engineering group, which was made up of specialists in software development, equipment maintenance, calibration and repair, tooling and fixturing, and testing equipment operation. Software engineers developed programs for specific applications. The programs were then retained in a software library for future use. ETO had 6,500 different software programs on file, of which 1,300 were programs developed in the past year. ETO also had an inventory of 1,500 tools and fixtures, of which 300 had been developed in the past year. The large number of tools and fixtures allowed the testing of components with a wide variety of leads, pin combinations, and mating configurations.

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The testing facility was divided into two rooms. The main testing room contained the equipment used for electrical testing. The mechanical room contained the equipment used for mechanical testing, plus incoming receiving and the stockroom. A total of 20 people worked in the two rooms on each of two main shifts, and 10 people worked on the night shift.

Cost Accounting System

The cost accounting system measured two components of cost: direct labor and burden. Burden was grouped into a single cost pool that included burden costs associated with each of the testing rooms as well as the engineering burden costs relating to software and tooling development and the administrative costs

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