Siemens electric motor works.

1. SIEMENS ELECTRIC
MOTORS
MANAGEMENT ACCOUNTING
GROUP 12:
MATTEO DE ANNA
MARSHELLA OOSTERBEEK
MARTIN RANDBY
MARTIN RODIAN PEDERSEN
MARIKA TORCITTO
MARTA ZUGLIANO
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2. AGENDA
• Current situation: 1987
• Change in strategy
• Traditional costing system
• Problem
• Solution
• Conclusion
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3. SIEMENS: EMW FROM 1937 TO
1987
Motors
•Standard motors: 80% of sales
volume
•Customized motors: 20% of sales
volume
Increase of competitiviness
on the market
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4. CHANGE IN STRATEGY
EMW could not lower its costs
sufficiently
CHANGE
IN
STRATEGY
They changed their main focus to
customized engine
They decreased their overall
volume
However standard motors still
accounted for half of the total
annual output
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5. TRADITIONAL COSTING
SYSTEM (1)
MATERIAL AND LABOUR COSTS WERE
ASSIGNED DIRECTLY TO THE PRODUCTS
OVERHEAD
COSTS
MATERIALS PRODUCTION SUPPORT
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6. TRADITIONAL COSTING
SYSTEM (2)
• Cost of each motor increases as the number
of special components increases
• Cost per unit is flat regardless of the
number of units ordered
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7. MT

8. SOLUTION
They transferred support related
costs in to two new cost pools:
SPECIAL
COMPONENTS
COSTS
ORDER PROCESSING
COSTS
• «Without the new cost system, our new
strategy would have failed»
(Mr. Lottes, director of Business Operations)
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9. NEW COSTING SYSTEM
Total costs Amount Rate per unit
Special
components
$ 19.500.000 325.000 $60,00
Order
processing
$ 13.800.000 65.625 $210,29
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10. CONCLUSION (1)
$376.92
Cost per unit
$613.89
$370.63
$420.39
$713.49
$416.23
OLD NEW (1 UNIT) NEW (10 UNITS)
A B
The old system inaccurately represents, for
orders smaller than 10 units, the true costs for
fulfilling each order
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11. CONCLUSION (2)
THE NEW COSTING SYSTEM IMPROVES THE
DECISION-MAKING PROCESS BY:
Identifying those
orders they
should accept
Allocating
cost more
accurately
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12. QUESTIONS?
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