Digital Communications, Inc.: Encoder Device Division -Reference 9-189-083: Analysis and Comments

INTRODUCTION

The Encoder Device division (EDD) at Digital Communications is a producer of communications devices for Government Agencies in the United States. The ships company works closely with Government Agencies and due to the nature of the devices they produce, and their application the Company works on a need to know basis and as such production sections are compartmentalised.

Production of spokesperson Ratio encryption (VRE) devices is on going, however a new microprocessor has been developed, rendering the brisk microprocessor obsolete. As a consequence the microprocessor needs be fitted to each existing devices in the field and all new devices in production. EDD wish to win this replacement start out.

EDD have vast experience in ground up bids for entire programmes but not on single sub-assemblies for resale. EDD are self-confident that they understand their business well, however they fear they lack the dilate information about the costs associated with sub assemblies.

They wish to turn over an attractive but profitable bid for the contract.

STRUCTURE OF EDD.

EDD has four describe production departments: Data Encoding (DE), Video Encoding (VE), Voice Ratio Encoding (VRE) and Variable Wire Encoding. This specific contract is exclusive to VRE.

EDD therefore need to ensure that they have the remunerate division of costs between each production department and that the cost for each department is then split justly between the underlying manufacturing processes within the department.

EDD AND ACTIVITY-BASED COSTING.

EDD has already completed a great deal of work for Activity Based be (ABC), however their actual costing system needs to be capable of allocating the costs of multiple support departments in a refined and appropriate manner. As EDD has good product diversity, bulky allocation of costs has becoming increasingly inaccurate and has likely already lead to either product overcosting or undercosting or both. A refined costing system...

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