The Seimens Electric Motor

The Seimens Electric Motor Works is electric and electric products company which set up running from 1937 in Bad Neustadt. Through the 1970s to 1980s they had been producing a variety of electric motors for different customers. The environment of industry was highly competitive especially, standard A/C motors, because of existing of lower labor rates of its Eastern Bloc competitors. The company started to manufacture refrigerator motors at the beginning of the foundation of the company. After a year of the start producing refrigerator motors, they changed their productions to electric motors for other applications. The process of manufacturing products was relatively long runs of a single type of motors. The strategy changed the way of manufacturing efficiently a number of motors in small production runs. The late 80's Electric Motor Works (EMW) replaced almost every machine in order to automate and robot the production process at the factory.

aIn terms of overhead costs, they have three different overhead, materials, labor or machine and support related costs which are consisted of engineering, tooling and administrative costs. In traditional costing system, material overhead was for Base motor $5280 and for special motor $720, totaling $6000. Manufacturing overhead was $106800 and $13200 respectively. For support related overhead, $83160 of base motor costs which were $10560 of engineering costs, $19800 of tooling and $52800 of administrative costs and $11340 of special motor costs which were $1440, $2700 and $7200 respectively. In contrast, in new costing system, material and manufacturing overhead were the same as the traditional ones. However, support related costs were $53856 of base motor costs and $7344 of special motor costs. There were $5016 of engineering, $19800 of tooling and $29040 of administrative costs on base motor costs whereas there were $684, $2700 and $3960 respectively on special motor costs. Other costs were transferred to the new cost pool. $29304 and $3996 of support costs were incurred to both base and special motors. By computing, detailed overhead costs, managers can identify which costs should they reduce first.