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Background: Elon Musk, the man who is responsible for revolutionizing the automotive space is confused. Why you ask? He met with Ms. Static who explained
Background: Elon Musk, the man who is responsible for revolutionizing the automotive space is confused. Why you ask? | ||||
He met with Ms. Static who explained to him that under the current allocation system, engineering costs amount to $46,880 per Model S and $15,630 per Model X. Elon responds: | ||||
"How - Look at the Model X - its freaking awesome and is insanely over engineered. How can it cost leass than our base model?" he decides to hire you as a consultant to drive transperency into the costs | ||||
Problem: Develop ABC to clear the mess up | ||||
Cost Pool | Activity Costs | Cost Driver | Driver | |
Machine Setup | $ 360,000 | Setup Hours | 4,000 | |
Materials Handling | $ 100,000 | Material (lbs) | 20,000 | |
Utility | $ 40,000 | Kw/hr | 40,000 | |
Information by Product | Model S | Model X | ||
Units | 4,000 | 20,000 | ||
Direct Materials | $ 42,000 | $ 54,000 | ||
Direct Labor | $ 24,000 | $ 40,000 | ||
Setup Hours | 200 | 240 | ||
Materials | 1,000 | 3,000 | ||
Kw/Hr | 2,000 | 4,000 | ||
ii | What / How do you suspect Ms. Static arrived at her numbers? | |||
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