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John Deere Case

John Deere Case

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Published by Purnendu Singh
John Deere Case, Managerial Accounting
John Deere Case, Managerial Accounting

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Categories:Types, Business/Law
Published by: Purnendu Singh on Jun 19, 2011
Copyright:Attribution Non-commercial

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07/16/2014

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John Deere Case Analysis
 
Q
UESTION
1
 W 
hat are the strengthsand weaknesses of thecurrent costing system(data on exhibit 9)?
 
 A 
NSWER
1
Weakness‡System was ineffective for costingand bidding individual parts.‡The large dispersion (ranging from50-60% on some parts and 200-300% on others questions thevalidity of standard cost systemfor determining cost of individualparts.‡Machine hours are not based onproduct unit thus leading toerroneous allocation of costs.‡Budgeted overhead ratescomputed on actual past charges (and asking the question whetherthere will be any changes) thiswas again not reliable as theproduction volume was changingyear after year.‡Employee benefit based onmachine hours.Strengths‡The strengths of the currentcosting system lie in its simplicityof allocations. The allocation of overhead is done on the basis of direct labor and direct machinehours.‡Required less computing effort.‡Satisfactory at aggregate level dueto large volume of products‡With the increased usage of automated machines designedmethod of adopting ACTS (actualcycle time standard) rate was agood approach.‡System was evolved to take care of period overheads and productoverheads.

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