Brian Malloy
ACC 333 – B – Stoel
Case 5 – CmbH

1. Metabo faced a few issues that caused dissatisfaction with the old cost system. One of the major flaws with this old cost system was their inability to show the cost for each of their different products. Instead, Metabo was finding cost using their full production cost divided by their total units. Secondly, the machine rates were not treated as a mixed cost, causing inaccurate measurements of utilization. Lastly, Metabo was distributing their fringe benefits based on where an employee was originally assigned, rather than where they do their work. 2. Step 1: Metabo developed an annual budget based on estimated output for the period. Their estimations show what the company expects for their estimated level output, which will then be compared and adjusted to the actual numbers.
Step 2: The previous estimations are now divided among the three cost centers. The cost estimations from step 1 are divided among the three new cost centers based on predicted output. Next, Metabo finds the variable rate by taking the total budgeted variable costs and dividing it by total operation hours. Finally, they take this budgeted variable cost and multiply it by the expected operating hours of the three cost centers. This information shows the total budgeted costs from step 1 allocated across the three operating cost centers.
Step 3: Metabo then goes on to determine their monthly actual costs for each specific cost driver. Next, they calculated the actual hours worked for the three operating cost centers. These calculations represent the monthly output of each cost driver compared to the budget.
Step 4: Metabo next determined the monthly fixed costs by dividing total fixed costs in step 1 by 12 (months). They then determined the monthly variable costs by dividing the total budgeted variable costs by 12. The variance was