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Required:

Queston 01: Calculate the cost of making one unit of product A and Product E in Exihibit 3 under the traditional and the new cost systems?

Question 02: Calculate the costs for products A and E assuming that 1 unit, 10 units, 20 Units or 100 units are ordered?

Question 03: What additional strategic issues, beyond costing individual products are raised by the financial?

Chasser 1O Masagment Comrel of Opersa CASE 10-3 SIEMENS ELECTRIC MOTOR WORKS Ten years ago our elecrie motor business win real duce electric motors for other applications. At the end of trouble. Low labor rates allowed the Eastem Bloc countries to seli slandard motors at prices we were mable to match We had become the high-cost World War II, the Bad Neustadt plant was the only Siemensfactory in West Germany capable of producing electric nsotors, All the other Siemens production facil producer in the industry. Consequently, we decided to ities had been completely destroyed or seized by Eastern change our strategy and become a specialty motor Bloc countries. Afier an aggressive rebailding program, Bad Neustadt emerged as the firm's primary producer of producer. Once we adopled our new strategy, we discovered that waile or eising cost system was electrie motors. Through the 1970s, EMW produced about 200 different lypes of standard motors, at a otal annual volume around 230,000 motors, Standard motors accounted far 80 percent of sales volumes-the remaining 20 percent were customized motors. The production process was characterized by relatively long runs of a single type of motor. Because identical motors were used by a wide range of customers, standard motors were inventoried and shipped as orders were inaccurate information hew e used it to cosi specially motors Karl Hein Las, Siemens Corporation Headquartered in Munich. Siemens AG, a producer of received. The market for standard ANC motors was price aggres profit. Despite a majar expan- sion and automation program begun in 1974, by the early 1980s EMW found it could not lower its costs electrical and electronic d electronic pruducts, was one of the exlremely competitive. The fim was under c world's largest carporations Revenues totaled 51bi pressure to reduce costs so that it coukd lion deutsche marks in 1987, with roughly half this sively and still make a of Germany. The Siemens organizatian was split into seven major groups and five corporate divisions. The ulliciently to offset the lower labor rates of its Eastern argest group, Energy and Automation, accounted for Blocmpetitors. 24 percent of toal revenues. Low-wattage altemating current (AC) 0 motars were produced at the Electric Change in Strategy Motar Works (EMW). which was part of the ManufacAensive study revealed that EMW could become a turing Industries Divisian of the Energy and Automa profitable producer of low-volume, customized AIC tion Group. h-e motors were produced a s To help implement this strategy, the Bad Neustadt plant was enlarged and dedicated to the manu- another facility facture of A/C motors with power ratings ranging from 0.16 to 18.5 kilowatts. These motors supported a num ber of upplications including automation engineering The Electric Motor Works Located in the small town of Bad Neastadt, the original Siemens EMW plant ws built in 1937 to manufacture refrigerator motors for Valkskuhlsch-raenke(people's refrigerators). Less than a year later, Mr. Siemens halted the production of refrigerator motoers and Sicnes A-191-006 and SienceB 9-189-0901 cases wren by Preleson Robin Coopes aad Kacn Wruck S tool camphity dr he ide od Felk wear mise or", r. Bee began to po- Chasser 1O Masagment Comrel of Opersa CASE 10-3 SIEMENS ELECTRIC MOTOR WORKS Ten years ago our elecrie motor business win real duce electric motors for other applications. At the end of trouble. Low labor rates allowed the Eastem Bloc countries to seli slandard motors at prices we were mable to match We had become the high-cost World War II, the Bad Neustadt plant was the only Siemensfactory in West Germany capable of producing electric nsotors, All the other Siemens production facil producer in the industry. Consequently, we decided to ities had been completely destroyed or seized by Eastern change our strategy and become a specialty motor Bloc countries. Afier an aggressive rebailding program, Bad Neustadt emerged as the firm's primary producer of producer. Once we adopled our new strategy, we discovered that waile or eising cost system was electrie motors. Through the 1970s, EMW produced about 200 different lypes of standard motors, at a otal annual volume around 230,000 motors, Standard motors accounted far 80 percent of sales volumes-the remaining 20 percent were customized motors. The production process was characterized by relatively long runs of a single type of motor. Because identical motors were used by a wide range of customers, standard motors were inventoried and shipped as orders were inaccurate information hew e used it to cosi specially motors Karl Hein Las, Siemens Corporation Headquartered in Munich. Siemens AG, a producer of received. The market for standard ANC motors was price aggres profit. Despite a majar expan- sion and automation program begun in 1974, by the early 1980s EMW found it could not lower its costs electrical and electronic d electronic pruducts, was one of the exlremely competitive. The fim was under c world's largest carporations Revenues totaled 51bi pressure to reduce costs so that it coukd lion deutsche marks in 1987, with roughly half this sively and still make a of Germany. The Siemens organizatian was split into seven major groups and five corporate divisions. The ulliciently to offset the lower labor rates of its Eastern argest group, Energy and Automation, accounted for Blocmpetitors. 24 percent of toal revenues. Low-wattage altemating current (AC) 0 motars were produced at the Electric Change in Strategy Motar Works (EMW). which was part of the ManufacAensive study revealed that EMW could become a turing Industries Divisian of the Energy and Automa profitable producer of low-volume, customized AIC tion Group. h-e motors were produced a s To help implement this strategy, the Bad Neustadt plant was enlarged and dedicated to the manu- another facility facture of A/C motors with power ratings ranging from 0.16 to 18.5 kilowatts. These motors supported a num ber of upplications including automation engineering The Electric Motor Works Located in the small town of Bad Neastadt, the original Siemens EMW plant ws built in 1937 to manufacture refrigerator motors for Valkskuhlsch-raenke(people's refrigerators). Less than a year later, Mr. Siemens halted the production of refrigerator motoers and Sicnes A-191-006 and SienceB 9-189-0901 cases wren by Preleson Robin Coopes aad Kacn Wruck S tool camphity dr he ide od Felk wear mise or", r. Bee began to po