Consider the following description of the manufacturing environment at Hewlett-Packard's (HP) Boise Surface Mount Center (BSMC. in Idaho:
The BSMC manufactures about 50 different electronic surface boards for internal customers within HP. With surface mount technology, patches of semiliquid solder are placed on the surface of a circuit board and electronic components are placed on the solder patches. Then the board goes through an oven to melt the solder to form a strong mechanical bond and a reliable electronic circuit. The process is highly automated, with computer controlled "pick and place"
machines that can select more than 100 different components each minute from the correct reel and place each one on the surface of the board within a tolerance of four thousandths of an inch. Production volumes for each board vary from a few hundred per month to several thousand. Annual production costs exceed $100 million.. About 700 employees work directly in the BSMC, including production workers and their supervisors, engineers, and material procurement personnel. In the circuit board industry, total volume sometimes is cited as the total number of placements - the number of individual electronic components attached to all boards manufactured. The BSMC makes hundreds of millions of placements annually. The BSMC has to compete in a very dynamic business environment. To get and keep business, the BSMC must compete for orders with other circuit board manufacturers within HP and with outside vendors, based on schedule, quality and cost. The life cycles of both the product and manufacturing technology are short. Efforts to get new business require continual interaction with customers to help them design new boards that can be produced efficiently,
to prepare cost bids and to start up production of new boards. Production volumes fluctuate as older boards phase out of production and newer boards are introduced. As technology continues to evolve, new equipment is inserted in the manufacturing line. The manufacturing environment changes so rapidly that if a few weeks elapsed between your visits to the factory, the production line may look completely different next time. (Quoted from "ABC puts Accountants on Design Team at HP,"
Management Accounting, September, 1993)
The BSMC was using a traditional cost accounting system where overhead was applied as a percentage of direct material costs.
Required: Explain why the BSMC environment would be one where the conditions for Activity-Based-Costing and Management would be appropriate. Cite specifics from the above article.

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The Answer of Consider the following description of the manufacturing environment at Hewlett-Packard's (HP) Boise Surface Mount Center (BSMC. in Idaho:
The BSMC manufactures about 50 different electronic surface boards for internal customers within HP. With surface mount technology, patches of semiliquid solder are placed on the surface of a circuit board and electronic components are placed on the solder patches. Then the board goes through an oven to melt the solder to form a strong mechanical bond and a reliable electronic circuit. The process is highly automated, with computer controlled "pick and place"
machines that can select more than 100 different components each minute from the correct reel and place each one on the surface of the board within a tolerance of four thousandths of an inch. Production volumes for each board vary from a few hundred per month to several thousand. Annual production costs exceed $100 million.. About 700 employees work directly in the BSMC, including production workers and their supervisors, engineers, and material procurement personnel. In the circuit board industry, total volume sometimes is cited as the total number of placements - the number of individual electronic components attached to all boards manufactured. The BSMC makes hundreds of millions of placements annually. The BSMC has to compete in a very dynamic business environment. To get and keep business, the BSMC must compete for orders with other circuit board manufacturers within HP and with outside vendors, based on schedule, quality and cost. The life cycles of both the product and manufacturing technology are short. Efforts to get new business require continual interaction with customers to help them design new boards that can be produced efficiently,
to prepare cost bids and to start up production of new boards. Production volumes fluctuate as older boards phase out of production and newer boards are introduced. As technology continues to evolve, new equipment is inserted in the manufacturing line. The manufacturing environment changes so rapidly that if a few weeks elapsed between your visits to the factory, the production line may look completely different next time. (Quoted from "ABC puts Accountants on Design Team at HP,"
Management Accounting, September, 1993)
The BSMC was using a traditional cost accounting system where overhead was applied as a percentage of direct material costs.
Required: Explain why the BSMC environment would be one where the conditions for Activity-Based-Costing and Management would be appropriate. Cite specifics from the above article.

Consider the Following Description of the Manufacturing Environment at Hewlett-Packard's