Harvard Case - Siemens Electric Motor Works (A): Process-Oriented Costing
"Siemens Electric Motor Works (A): Process-Oriented Costing" Harvard business case study is written by Robin Cooper, Karen H. Wruck. It deals with the challenges in the field of Accounting. The case study is 8 page(s) long and it was first published on : Oct 20, 1988
At Fern Fort University, we recommend Siemens Electric Motor Works (SEMW) implement an activity-based costing (ABC) system to improve cost accounting, enhance decision-making, and drive profitability. This recommendation aims to address the limitations of the current process-oriented costing system and provide a more accurate and granular understanding of cost drivers and profitability across different product lines and customer segments.
2. Background
Siemens Electric Motor Works (SEMW) is a leading manufacturer of electric motors, generators, and related equipment. The company faced challenges with its existing process-oriented costing system, which did not accurately reflect the true cost of producing different products. This led to inaccurate pricing decisions, difficulty in identifying profitable product lines, and a lack of transparency in cost allocation.
The case study focuses on the efforts of SEMW's management team to address these issues and improve the company's cost accounting practices. The main protagonists are:
- Dr. Alfred Schaller: The manager of SEMW's cost accounting department, who is tasked with finding a solution to the company's costing problems.
- Dr. Hans-Joachim Kummer: A consultant from Price Waterhouse, who is hired to assist SEMW in implementing a new cost accounting system.
- SEMW's management team: The individuals responsible for making decisions regarding the company's cost accounting practices.
3. Analysis of the Case Study
The case study highlights the limitations of the traditional process-oriented costing system used by SEMW. This system allocates costs based on direct labor hours, which does not accurately reflect the true cost drivers for different products. For example, a complex motor requiring significant engineering and design work may have a higher cost than a simple motor, even if both require the same amount of direct labor.
To address this issue, SEMW needs to adopt an activity-based costing (ABC) system. ABC is a more sophisticated cost accounting method that identifies and tracks the cost of individual activities involved in producing a product. These activities are then linked to specific products, providing a more accurate picture of the true cost of each product.
The ABC system will help SEMW achieve the following:
- Improved Cost Accounting: ABC will provide a more accurate and granular understanding of cost drivers, leading to improved cost allocation and a more accurate reflection of the true cost of products.
- Enhanced Decision Making: The detailed cost information provided by ABC will support better pricing decisions, product mix optimization, and resource allocation.
- Increased Profitability: By identifying and managing cost drivers effectively, SEMW can improve profitability and make more informed strategic decisions.
4. Recommendations
SEMW should implement an activity-based costing (ABC) system to address its cost accounting challenges. The implementation should involve the following steps:
- Identify Cost Drivers: SEMW should identify the key activities involved in producing its products and determine the cost drivers for each activity. This could include engineering design, machine setup, material handling, quality inspection, and customer support.
- Allocate Costs: Once the cost drivers are identified, SEMW should allocate costs to specific products based on their consumption of each activity. This will provide a more accurate picture of the true cost of each product.
- Develop a Costing System: SEMW should develop a comprehensive ABC costing system that integrates with its existing financial systems. This system should be designed to track and manage costs effectively, providing real-time insights into cost performance.
- Train Employees: SEMW should provide training to its employees on the new ABC system, ensuring they understand its principles and how to use it effectively.
- Monitor and Evaluate: SEMW should monitor the performance of the ABC system and make adjustments as needed. Regular reviews and variance analysis will help ensure that the system is delivering the desired results.
5. Basis of Recommendations
The recommendation to implement an ABC system is based on the following considerations:
- Core Competencies and Consistency with Mission: ABC aligns with SEMW's mission to provide high-quality, innovative products and services. By improving cost accounting, SEMW can optimize its operations and focus on its core competencies.
- External Customers and Internal Clients: ABC will provide SEMW with a more accurate understanding of the cost of its products, allowing it to set competitive prices and meet the needs of its customers. Internal clients, such as sales and marketing teams, will also benefit from the improved cost information.
- Competitors: As competitors adopt more sophisticated cost accounting methods, SEMW needs to stay competitive by implementing an ABC system. This will allow the company to make informed decisions about pricing, product mix, and resource allocation.
- Attractiveness ' Quantitative Measures: The implementation of ABC is expected to improve SEMW's profitability by providing a more accurate picture of the cost of its products. This will lead to better pricing decisions, reduced costs, and improved resource allocation.
6. Conclusion
Implementing an activity-based costing (ABC) system will provide SEMW with a more accurate and granular understanding of its cost drivers, leading to improved decision-making, increased profitability, and a more competitive position in the market.
7. Discussion
Other alternatives not selected include:
- Maintaining the current process-oriented costing system: This would be a short-sighted approach, as it would continue to provide inaccurate cost information and hinder SEMW's ability to make informed decisions.
- Implementing a simplified version of ABC: While this could be a less expensive option, it may not provide the same level of detail and accuracy as a fully implemented ABC system.
The risks associated with implementing an ABC system include:
- High implementation costs: Implementing ABC can be costly, requiring significant investment in software, training, and staff time.
- Resistance to change: Employees may resist the implementation of a new costing system, particularly if they are unfamiliar with ABC.
- Data quality issues: The accuracy of the ABC system relies on the quality of the data collected. Poor data quality can lead to inaccurate cost information and undermine the effectiveness of the system.
8. Next Steps
The implementation of the ABC system should be a phased process, with clear milestones and timelines. The following steps should be taken:
- Phase 1: Conduct a feasibility study to assess the costs and benefits of implementing ABC.
- Phase 2: Develop a detailed implementation plan, including timelines, resources, and training requirements.
- Phase 3: Implement the ABC system, starting with a pilot project in a specific product line or department.
- Phase 4: Monitor and evaluate the performance of the ABC system, making adjustments as needed.
By following these steps, SEMW can successfully implement an ABC system and reap its benefits in terms of improved cost accounting, enhanced decision-making, and increased profitability.
Hire an expert to write custom solution for HBR Accounting case study - Siemens Electric Motor Works (A): Process-Oriented Costing
- Business Model Challenges Electric Vehicle Company
- Lille Tissages Sa
- Bw Manufacturing Company
- Building Digital Manufacturing Enterprise Future Siemens
- Headquarters Overhead Cost Allocation Korea Auto Insurance Co Inc
- Siemens Ag Key Account Management
- Better Place Electric Vehicle Renaissance
- Digitalization Siemens
- Gentle Electric Co
- Monterrey Manufacturing Co
- Superior Manufacturing Co
- Scientific Approach Creating New Business Mimoto Abridged Version
Case Description
Explores how a cost system can help support a firm's decision to change strategies. In the process, the students are introduced to a simple activity-based cost system. Siemens Electric Motor Works found itself facing an increasingly competitive environment and so made a decision to move from mass production of specialty motors to the production of small lots of custom motors. In doing so, they found their old cost system led them to poor decision making. By switching to a simple activity-based system, more accurate product costs were computed, facilitating better divisional performance.
🎓 Struggling with term papers, essays, or Harvard case studies? Look no further! Fern Fort University offers top-quality, custom-written solutions tailored to your needs. Boost your grades and save time with expertly crafted content. Order now and experience academic excellence! 🌟📚 #MBA #HarvardCaseStudies #CustomEssays #AcademicSuccess #StudySmart Write my custom case study solution for Harvard HBR case - Siemens Electric Motor Works (A): Process-Oriented Costing
Hire an expert to write custom solution for HBR Accounting case study - Siemens Electric Motor Works (A): Process-Oriented Costing
Siemens Electric Motor Works (A): Process-Oriented Costing FAQ
What are the qualifications of the writers handling the "Siemens Electric Motor Works (A): Process-Oriented Costing" case study?
Our writers hold advanced degrees in their respective fields, including MBAs and PhDs from top universities. They have extensive experience in writing and analyzing complex case studies such as " Siemens Electric Motor Works (A): Process-Oriented Costing ", ensuring high-quality, academically rigorous solutions.
How do you ensure confidentiality and security in handling client information?
We prioritize confidentiality by using secure data encryption, access controls, and strict privacy policies. Apart from an email, we don't collect any information from the client. So there is almost zero risk of breach at our end. Our financial transactions are done by Paypal on their website so all your information is very secure.
What is Fern Fort Univeristy's process for quality control and proofreading in case study solutions?
The Siemens Electric Motor Works (A): Process-Oriented Costing case study solution undergoes a rigorous quality control process, including multiple rounds of proofreading and editing by experts. We ensure that the content is accurate, well-structured, and free from errors before delivery.
Where can I find free case studies solution for Harvard HBR Strategy Case Studies?
At Fern Fort University provides free case studies solutions for a variety of Harvard HBR case studies. The free solutions are written to build "Wikipedia of case studies on internet". Custom solution services are written based on specific requirements. If free solution helps you with your task then feel free to donate a cup of coffee.
I’m looking for Harvard Business Case Studies Solution for Siemens Electric Motor Works (A): Process-Oriented Costing. Where can I get it?
You can find the case study solution of the HBR case study "Siemens Electric Motor Works (A): Process-Oriented Costing" at Fern Fort University.
Can I Buy Case Study Solution for Siemens Electric Motor Works (A): Process-Oriented Costing & Seek Case Study Help at Fern Fort University?
Yes, you can order your custom case study solution for the Harvard business case - "Siemens Electric Motor Works (A): Process-Oriented Costing" at Fern Fort University. You can get a comprehensive solution tailored to your requirements.
Can I hire someone only to analyze my Siemens Electric Motor Works (A): Process-Oriented Costing solution? I have written it, and I want an expert to go through it.
🎓 Struggling with term papers, essays, or Harvard case studies? Look no further! Fern Fort University offers top-quality, custom-written solutions tailored to your needs. Boost your grades and save time with expertly crafted content. Order now and experience academic excellence! 🌟📚 #MBA #HarvardCaseStudies #CustomEssays #AcademicSuccess #StudySmart Pay an expert to write my HBR study solution for the case study - Siemens Electric Motor Works (A): Process-Oriented Costing
Where can I find a case analysis for Harvard Business School or HBR Cases?
You can find the case study solution of the HBR case study "Siemens Electric Motor Works (A): Process-Oriented Costing" at Fern Fort University.
Which are some of the all-time best Harvard Review Case Studies?
Some of our all time favorite case studies are -
Can I Pay Someone To Solve My Case Study - "Siemens Electric Motor Works (A): Process-Oriented Costing"?
Yes, you can pay experts at Fern Fort University to write a custom case study solution that meets all your professional and academic needs.
Do I have to upload case material for the case study Siemens Electric Motor Works (A): Process-Oriented Costing to buy a custom case study solution?
We recommend to upload your case study because Harvard HBR case studies are updated regularly. So for custom solutions it helps to refer to the same document. The uploading of specific case materials for Siemens Electric Motor Works (A): Process-Oriented Costing ensures that the custom solution is aligned precisely with your needs. This helps our experts to deliver the most accurate, latest, and relevant solution.
What is a Case Research Method? How can it be applied to the Siemens Electric Motor Works (A): Process-Oriented Costing case study?
The Case Research Method involves in-depth analysis of a situation, identifying key issues, and proposing strategic solutions. For "Siemens Electric Motor Works (A): Process-Oriented Costing" case study, this method would be applied by examining the case’s context, challenges, and opportunities to provide a robust solution that aligns with academic rigor.
"I’m Seeking Help with Case Studies,” How can Fern Fort University help me with my case study assignments?
Fern Fort University offers comprehensive case study solutions, including writing, analysis, and consulting services. Whether you need help with strategy formulation, problem-solving, or academic compliance, their experts are equipped to assist with your assignments.
Achieve academic excellence with Fern Fort University! 🌟 We offer custom essays, term papers, and Harvard HBR business case studies solutions crafted by top-tier experts. Experience tailored solutions, uncompromised quality, and timely delivery. Elevate your academic performance with our trusted and confidential services. Visit Fern Fort University today! #AcademicSuccess #CustomEssays #MBA #CaseStudies
How do you handle tight deadlines for case study solutions?
We are adept at managing tight deadlines by allocating sufficient resources and prioritizing urgent projects. Our team works efficiently without compromising quality, ensuring that even last-minute requests are delivered on time
What if I need revisions or edits after receiving the case study solution?
We offer free revisions to ensure complete client satisfaction. If any adjustments are needed, our team will work closely with you to refine the solution until it meets your expectations.
How do you ensure that the case study solution is plagiarism-free?
All our case study solutions are crafted from scratch and thoroughly checked using advanced plagiarism detection software. We guarantee 100% originality in every solution delivered
How do you handle references and citations in the case study solutions?
We follow strict academic standards for references and citations, ensuring that all sources are properly credited according to the required citation style (APA, MLA, Chicago, etc.).