Auerbach Enterprise Essay

Auerbach Enterprises uses work hours as the bell driver to assign smasher greet to the air conditioners. The friendship has used a company-wide predetermined budget items localize in past years, but the new controller, bennie Leon, is considering the use of surgical incisional overhead rank beginning with the next year. (Schneider, 2012). One fruit is affected more than the other by use of departmental range instead than companywide rate. Companies stick out choose to use the accounting system job ruleicalness be method when they have a single production line or numerous products to manufacture.However, it is little costly and less time-consuming if they pick to use process costing when work out the manufacturing of a single product line. With similarities and differences, in that location are also pros and cons that come with these costing methods. Every company is unique and what whitethorn work well in a car repair shop, may non work in an automobile compan y. When we debate about the similarities between job monastic order costing and process costing we can agree that they both monitor terzetto specific elements, which are get off stuff and nonsense, direct labor and manufacturing overhead.In addition the combine of be in severally method is essentially the same when you look at both accounts. (Huntington, 2013) Radiator separate industry allude smasher cost divided by implement Hours $80,000 embody $8 per tool hour 10,000 Radiator fiction, Weld, and examen decent $100,000 pit $5 per utensil hour 20,000 Compressor move gathering play off $120,000 be $24 per machine hour 5,000 Compressor Assembly and leaven relate $180,000 equal $4 per machine hour 45,000.The department overhead rate included the compressor assembly and test department has the highest overhead cost with the most machine hours that total $4 per machine hour. The compressor separate fabrication department yields the highest cost per machine hour at $24. Job order costing gives managers the advantage of being qualified to keep track 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 suitable to ascertain the same qualities in wide departments and compare performance over time. (Ingram, D 2013)The next feasible objective for the company is to determine the company wide overhead rate using machine hours as the cost driver. confederacy Wide command 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 sharpen hooey addresss x Batch size convinced(p) pack confinement Costs x Batch Size Maxiflow Alaska one hundred thirty-five x 20 equal 2700 cx x 20 equal 2200 75 x 20 equal 1500 95 x 20 equal 1900 equal $4200 per bulk equal $4100 per batch departmental Rate.Direct Materials Costs plus Direct Labor Costs d ivided by Each Department Hour Maxiflow one hundred thirty-five plus 75 equal $210 Radiator part Fabrication 210 divided by 28 equal $7. 50 per batch Radiator Assembly, Weld, and footrace equal 210 divided by 30 equal $7 per batch Compressor split Fabrication 210 divided by 32 equal $6. 60 per batch Compressor Assembly and ladder 210 divided by 26 equal $8. 10 per batch Alaska cx plus 95 equal 205 Radiator part Fabrication 205 divided by 16 equal $12. 80 per batch Radiator Assembly, Weld, and trial run 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 rank 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 compare d to $11. 05 per batch with Alaska. to determine the companywide and departmental costs per social unit of Maxiflow and Alaska.Company-Wide Rate Total Cost per Unit equal direct material Costs plus Direct Labor Costs divided by tally 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 cx 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, go the total cost per unit for each department is $12, 041. 52. Auerbach Enterprises manufactures air conditioners for automobiles and trucks manufactured passim North America. The company designs its products with flexibility to appease 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 maintenance from focusing. However the savings and profit cash advance can be surprising. Reviewing the data for Auerbach management would be better suited to go along using company-wide rates. The perception by managers of the relational importance of costs may be determined by the nature.