This case you will be studying CableTech Bell Corporation (CTB) which operates in the telecommunications industry. CTB has two divisions: the Phone Division and the Cable
Service Division. The Phone Division manufactures telephones in several plants located in the Midwest.
For this week, you are to address the 6 required steps listed below.
Required:
The Phone Division has been using the same cost accounting system for over 10 years. Explain why its cost accounting system may be outmoded. What factors
determine when a new cost accounting system is warranted?
Using the method of least squares, calculate two cost formulas: one for overhead using direct labor cost as the driver, and one for materials handling cost using number of
moves as the driver. Comment on Jacob Carder’s observations concerning the outcomes.
How would you describe the cost behavior of the inspection activity? Assume that the quality control manager implements a program that reduces the number of defective
units by 50 percent. Because of the improved quality, the demand for inspection hours will also drop by 50 percent. What is the potential monthly reduction in inspection
costs? How did knowledge of inspection’s cost behavior help?
Calculate the overhead cost per unit for each phone model using direct labor cost to assign all overhead costs to products.
Calculate the overhead cost per unit using the four activities and drivers identified by Kim and Jacob. If you were Kim, would you be inclined to implement an ABC system
based on the evidence from this pilot test?
Suppose someone urged Kim to look into Time-Driven Activity-Based Costing (TDABC) instead of ABC. What would be the advantages of using a TDABC approach?