5 star only!!!

PART #2a

Review the Decision Case 1 (Harris Systems) located on page 942-943 in you textbook. Answer the four case questions in the Requirements section of the case. In addition, address the following in one to two paragraphs:

• Compare and contrast ABC costing and traditional costing methods, giving examples.

• In the assigned case, which system provides a more accurate picture of the cost incurred to produce the jobs?

• Provide examples of manufacturers in your geographic area and explain which system would be best for them.

Respond to each directive or question in 1–2 paragraphs. Apply current APA standards for writing style to your work.

Case 1. Harris systems specializes in servers for workgroup, e-commerce, and ERP applications. The company's original job costing system has two direct cost categories: direct materials and direct labor. Overhead is allocated to jobs at the single rate $22 per direct labor hour. A task force headed by Harris CFO recently designed an ABC system with four activities. The ABC system retains the current systems two direct cost categories. Thus, it budgets only overhead costs for each activity. Pertinent data follow:

Harris Systems has been awarded two new contracts, which will be produced as job A and job B. budget data relating to the contracts follow:

Requirements:

1. Compute the product cost per unit for each job, using the original costing system (with two direct cost categories and a single overhead allocation rate).

2. Suppose Harris systems adopts the ABC system. Compute the product cost per unit for each job using ABC.

3. Which costing systems more accurately assigns to jobs the cost of the resources consumed to produce them? Explain.

4. A dependable company has offered to produce both jobs for Harris for $5,400 per output unit. Harris may outsource (buy from the outside company) either job A only, job B only, or both jobs. Which course of action  will Harris’s managers take if they base their decision on (a) the original system? (b) ABC system cost? Which course of action will yield more income? explain

Case 2. To remain competitive Harris systems management believes the company must produce job B-type serves (from decision case 1) at a target cost of $5,400. Harris systems has just joined a B2B e market site that management believes will enable the firm to cut direct materials costs by 10%. Harris management also believes that a value-engineering team can reduce assembly time.

Requirements:  

1. Compute the assembling cost saving per job B-type server required to meet the $5,400 target cost. (hint: begin by calculating the direct materials, direct labor, and allocated activity costs per serve.)