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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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