Shun Electronics Company
7 Pages Posted: 10 Jun 2009
The Shun Electronics KL Radio division wants to expand its three departmental cost centers to eight, each with its own overhead cost allocation rate. As a result, it appears that the total costs for four of its six radios will increase, while two will decrease. The case puts students in the role of having to (a) understand why such a result would occur; (b) explain the specific changes made in the cost allocation system; and (c) evaluate whether the changes are an improvement.
Rev. Jun. 17, 2009
SHUN ELECTRONICS COMPANY
“Manjit,” said Chan Choong Tho, controller of the Shun Electronics Company's KL Radio Division, “I understand how you arrived at these new cost figures, but I'm not sure how we should present them to our colleagues. May Hwang is not going to be happy when she sees higher costs on four of our six radios, and she may not understand the cost principles involved. I don't know about Azraf—he's apt to say the costs are just estimates and we should stay with the present system.”
Chan Choong Tho was speaking to Manjit Singh, his new assistant controller. May Hwang was the division's sales manager and Azraf Tahir was the division manager. Six weeks earlier Chan had given Manjit the task of examining the division's cost accounting system to see if the product costs it produced were reasonably accurate. Manjit had reconstituted the basic cost data in a way that he thought might be more accurate and was reviewing the results with his boss.
The Shun Electronics Company was a medium-size, family-owned firm in the Malaysian electronics industry. The company had two operating divisions. The KB Monitor Division manufactured computer monitors that were primarily sold to off-brand computer companies. The KL Radio Division made two basic radios—a shelf model and a portable model. Each of the two models was available in three versions: one version was for use in a bathroom shower (a popular option especially in the American market); another had a 1950s-style metal cabinet; and the third version had a wooden cabinet. All six radios were distributed primarily through high-end catalog retailers.
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Keywords: accounting cost allocation product costs
Suggested Citation: Suggested Citation
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Shun Electronics Company
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