Auerbach Enterprise Essay Example for Free

Auerbach Enterprise EssayAuerbach Enterprises uses ccapable car hours as the address driver to assign smash cost to the air conditioners. The society has used a company-wide predetermined belt rate in past years, but the new controller, Bennie Leon, is considering the use of departmental overhead pass judgment beginning with the next year. (Schneider, 2012). One product is affected more than the other by use of departmental rates rather than companywide rate. Companies can choose to use the accounting job order costing system when they have a single product line or numerous products to manufacture. However, it is little costly and less time-consuming if they elect to use process costing when calculating the manufacturing of a single product line. With similarities and differences, thither are also pros and cons that come with these costing methods. Every company is unique and what may work easy in a car repair shop, may not work in an automobile company. When we bet abo ut the similarities between job order costing and process costing we can agree that they twain monitor three specific elements, which are direct material, direct labor and manufacturing overhead.In addition the bunk of cost in each method is essentially the same when you look at both accounts. (Huntington, 2013) Radiator split Fabrication enough Overhead Costs divided by Machine Hours $80,000 meet $8 per railway car hour 10,000 Radiator Assembly, Weld, and prove equal $100,000 equal $5 per implement hour 20,000 Compressor move Fabrication equal $120,000 equal $24 per machine hour 5,000 Compressor Assembly and Test equal $180,000 equal $4 per machine hour 45,000.The department overhead rates included the compressor assembly and test department has the highest overhead costs with the most machine hours that check $4 per machine hour. The compressor parts fabrication department yields the highest cost per machine hour at $24. Job order costing gives managers the advantage of being able to keep get well of individuals and teams performance in terms of cost-control, efficiency and productivity. Process costing, on the other hand, gives managers the advantage of being able to ascertain the same qualities in entire departments and compare performance over time. (Ingram, D 2013)The next operable objective for the company is to determine the company wide overhead rate using machine hours as the cost driver. bon ton Wide Overhead Rate equal Forecast Overhead divided by Expected Machine Hours Overhead Rate equal $480,000 equal $6 per machine hour 80,000. Company Wide Rate subscribe Material Costs x Batch Size accession lay Labor Costs x Batch Size Maxiflow Alaska 135 x 20 equal 2700 one hundred ten x 20 equal 2200 75 x 20 equal 1500 95 x 20 equal 1900 equal $4200 per tidy sum equal $4100 per batch Departmental Rate. have Materials Costs increase Direct Labor Costs divided by Each Department Hour Maxiflow 135 plus 75 equal $210 Radiator Parts Fabricat ion 210 divided by 28 equal $7. 50 per batch Radiator Assembly, Weld, and Test equal 210 divided by 30 equal $7 per batch Compressor Parts Fabrication 210 divided by 32 equal $6. 60 per batch Compressor Assembly and Test 210 divided by 26 equal $8. 10 per batch Alaska 110 plus 95 equal 205 Radiator Parts Fabrication 205 divided by 16 equal $12. 80 per batch Radiator Assembly, Weld, and Test 205 divided by 74 equal $2. 0 per batch Compressor Parts Fabrication 205 divided by 8 equal $25. 60 per batch Compressor Assembly and Test 205 divided by 66 equal $3. 10 per batch. There was only a $100 difference between Maxiflow and Alaska when it came to company-wide rates per batch. On other hand, the departmental rates between Maxiflow and Alaska were significantly different. Maxiflow had the cheaper departmental costs per batch with an average of $7. 30 per batch compared to $11. 05 per batch with Alaska. to determine the companywide and departmental costs per unit of Maxiflow and Alaska.C ompany-Wide Rate Total Cost per Unit equal direct material Costs plus Direct Labor Costs divided by Number of Units Maxiflow. Direct Materials equal Alaska 135 Direct Labor Costs equal 75 210 $415 plus $480,000 divided by 40 equal $12,010. 38 per unit 110 plus 95 equal 205 210 plus 205 equal $415 Departmental Rate Radiator Parts Fabrication $80,000 plus $415 divided by 40 equal $2010. 38 per unit Radiator Assembly, Weld, and Test $100,000 plus 415 divided by 40 equal $2510. 38.Compressor Parts Fabrication $120,000 plus 415 divided by 40 equal $3010. 8 Compressor Assembly and Test $180,000 plus 415 divided by 40 equal $4510. 38. So, it seems that the total costs per unit for the company-wide rate is slightly less per unit. The company-wide rate for total cost per unit is $12,010. 38, piece the total cost per unit for each department is $12, 041. 52. Auerbach Enterprises manufactures air conditioners for automobiles and trucks manufactured throughout North America. The company design s its products with flexibility to accommodate many makes and models of automobiles and trucks.The companys two main products are MaxiFlow and Alaska. (Schneider, 2012). The reduction of overhead expenses is one of the sparse areas of corporate cost control that receives few to no attention from management. However the savings and profit improvement can be surprising. Reviewing the data for Auerbach management would be better suited to retain using company-wide rates. The perception by managers of the relative importance of costs may be determined by the nature.