Depreciation and Cost Essay

1. The primary perplex of the current body to fail is the drill of a genius force rate. Burden damage of the testing rooms as well as other be such as admin were grouped into a single cost pool and then divided by the total savvy dollars. This resulted to a single burden rate of 145% of coach dig up dollars (cost driver).This method is not appropriate for Seligram beca physical exertion the information on the case symbolize that direct labor hours and car hours vary by product railroad and activity. In plyition, the burden cost of the main and test room withal satisfyingly vary. Therefore, using a single burden rate does not provide the true cost of the product, as it assumes all products consume direct labor and overhead in the same proportion.2. Cost for each system are as follows3. I prefer the system proposed by the advisor because it is the most particular, therefore entrust produce more accurate cost.4. The exemplification allocation base should have a direct cause-and-effect relation with the costs incurred. Based on the data provided in the case, it appears that the consultants proposed cost system is adequate because it considers the appropriate cost pool and allocation base. However, it should be noted that developing a cost system that is more detailed require the use of more time and resources. There needs to be a proper balance between accuracy and cost.5. There is significant cost involved in the purchase of bracing equipment. Although the machine will be located in the Main Room, I would use a separate cost pool when calculating the burden rate of the new machine. The purchase price of the machine is $2 million. I will add the one-time installation and programming cost to the acquisition cost of the machine since these costs are required in order to get the machine pretend for use.I will calculate depreciation based on the machines practical capacity over its estimated life, instead of double declining method. It seems that t he use of double declining balance method of depreciation is inappropriate for allocation of costs because this method incurs higher depreciation in the early years, although the utilization is sink in the early years. By using practical capacity as the base, I am able to properly match the cost with the use of the machine.