siemens case history
TRANSCRIPT
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SIEMENS ELECTRICMOTORS
MANAGEMENT ACCOUNTING
GROUP 12:
MATTEO DE ANNA
MARSHELLA OOSTERBEEK
MARTIN RANDBY
MARTIN RODIAN PEDERSEN
MARIKA TORCITTO
MARTA ZUGLIANO
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AGENDA
•Current situation: 1987
•Change in strategy
• Traditional costing system
• Problem
•Solution
•Conclusion
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SIEMENS: EMW FROM 1937 TO 1987
Motors
•Standard motors: 80% of sales
volume
•Customized motors: 20% of sales
volume
Increase of competitiviness
on the market
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CHANGE IN STRATEGY
EMW could not lower its costssufficiently
CHANGE IN
STRATEGY
They changed their main focus to customized engine
They decreased their overallvolume
However standard motors stillaccounted for half of the totalannual output
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TRADITIONAL COSTINGSYSTEM (1)
MATERIAL AND LABOUR COSTS WERE
ASSIGNED DIRECTLY TO THE PRODUCTS
OVERHEAD COSTS
MATERIALS PRODUCTION SUPPORT
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TRADITIONAL COSTING SYSTEM (2)
• Cost of each motor increases as the number of special components increases
• Cost per unit is flat regardless of the number of units ordered
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SOLUTION
• «Without the new cost system, our new
strategy would have failed»
(Mr. Lottes, director of Business Operations)
They transferred support related costs in to two new cost pools:
SPECIAL COMPONENTS
COSTS
ORDER PROCESSING COSTS
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NEW COSTING SYSTEM
Total costs Amount Rate per unit
Special components
$ 19.500.000 325.000 $60,00
Orderprocessing
$ 13.800.000 65.625 $210,29
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CONCLUSION (1)
$376.92
$613.89
$370.63
$420.39
$713.49
$416.23
OLD NEW (1 UNIT) NEW (10 UNITS)
Cost per unit
A B
The old system inaccurately represents, for orders smaller than 10 units, the true costs for
fulfilling each orderMT
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CONCLUSION (2)
THE NEW COSTING SYSTEM IMPROVES THE
DECISION-MAKING PROCESS BY:
Identifying thoseorders they
should accept
Allocatingcost more accurately
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QUESTIONS?MT