John Deere Component Works A Case Solution

Case Solution

The division has recognized the insufficiencies of the existing, traditional cost system for calculating product costs. Describes the innovative activity-based system which is built to more precisely trace expenses to individual products. Provides students using the opportunity to critique an average cost system also to appraise the characteristics in the recommended system that traces costs to production activities.

Excel Calculations

Standard Costing Method for PART 103

ABC Costing Method for PART 103

Questions Covered

1. How did the competitive environment change for the John Deere Component Works between the 1970’s and the 1980’s?

2. What caused the existing cost system to fail in the 1980’s? What are the symptoms of cost system failure?

3. How were the limitations of the existing cost system overcome by the ABC system?

4. Compare the cost of Product A103 (see Exhibit 11) under the existing cost system and under the ABC approach