Seligram, Inc. Electronic Testing Operations Essay
Seligram, Inc.: Electronic Testing Operations
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
Electronic Testing Operations (ETO), a division of Seligram, Inc., provided centralized testing for electronic components such …show more content…
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