what is the most successful labor

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dfdJohn Deere Component Works (A)
1. How did the competitive environment change for JDCW between then 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. Diagram the existing cost system for the turning machine area.
4. Diagram the ABC cost system for the turning machine area.
5. How were the limitations of the existing cost system overcome by the ABC system?
6. Compare the cost of product A103 (see Exhibit 11) under the existing cost system and under the ABC approach.
John Deere Component Works (B)
7. What are the characteristics of the products that were both helped and hurt by the ABC system?
8. What insights does ABC provide about the types of products to manufacture and the appropriate production processes to use?
9. What actions are being stimulated by the ABC Analysis?
10. Comment on the development, implementation, and acceptance of the ABC approach.1. Current Situation

The existing system at ETO, the labor-based burden allocation process, has become obsolescent since (a) an increased dependence on vendor certification, accordingly steadily declined direct labor hours, (b) a change from simple inspection services to broader-based test technology, (c) the introduction of high-technology components.
The current system allocates higher burden rates to the labor-intensive tests, which caused some customers to go away, eventually imposing the much higher burden rates on the remaining labor-intensive tests. It is a kind of death spiral.

2. Review of Proposal for New Burden Allocation System

We sampled five products to analyze the cost effect by changing burden allocation system. The costs of the five products calculated by each system are as below ; See Exhibit 1 for details.

We believe the system proposed by the consultant is the best one among three systems. Two-stage cost allocation system would alleviate the problem stated above, since more than

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