Bose Manufacturing produces two different models of cameras. One


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Bose Manufacturing produces two different models of cameras. One model has an automatic focus, whereas the other requires the user to determine the focus. The two products are produced in batches. Each time a batch is produced, the equipment must be configured (set up) for the specifications of the camera model being produced. The manual-focus camera requires more parts than the automatic-focus model. The manual-focus model is also more labor-intensive, requiring much more assembly time. Although this model requires less machine time, the machine configuration it requires is more complex, causing it to consume more of the setup activity resources than the automatic camera. Many, but not all, of the parts for the two cameras are purchased from external suppliers. Because it has more parts, the manual model makes more demands on the purchasing and receiving activities than does the automatic camera. Bose currently assigns only manufacturing costs to the two products. Overhead costs are collected in one plant-wide pool and are assigned to the two products in proportion to the direct labor hours used by each product. All other costs are viewed as period costs. Bose budgets costs for all departments within the plant—both support departments like maintenance and purchasing and production departments like machining and assembly. Departmental managers are evaluated and rewarded on their ability to control costs. Individual managerial performance is assessed by comparing actual costs with budgeted costs. Required: 1. Is Bose using a functional-based or an activity-based cost management system? Explain. 2. Assume that you want to design a more accurate cost accounting system. What changes would you need to make? Be specific. Explain why the changes you make will improve the accuracy of cost assignments. 3. What changes would need to be made to implement an activity-based operational control system? Explain why you believe the changes will offer improved control.

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