1. 11 Managerial Account - Cost Control Dr. Martin Taylor Team 7 (Boeshart/Sharipova/Alexander/Spencer) February 3, 2014 University of Texas At Arlington

2. 22 Agenda Cost Control Company Overview Accounting Measure H9200-XXX Oil Pressure Indicator –Why does this indicator cost $11,940.28? H9900A-XXX Fuel Flow Indicator –How we reduced our costs to $3,279.99 Conclusion

3. 33 Cost Control Primary purpose is to influence the factors that create cost and to control those costs. Starts by the business identifying what their costs are and evaluating if those costs are reasonable and affordable.

4. 44 Included in Cost Control Influencing factors that create changes to cost baseline Ensuring that requested changes are agreed upon in different company segments Managing actual changes when they occur to ensure a positive outcome Assuring that potential cost overruns do not exceed total funding for the project

5. 55 Included in Cost Control (Cont.) Monitoring cost performance to detect and understand variances from the cost baseline Recording all appropriate changes accurately against the cost baseline Preventing incorrect, inappropriate, or unapproved changes from being included in the reported cost or resource usage Informing appropriate stakeholders of approved changes Acting to bring expected cost overruns within acceptable limits and to decrease cost.

6. 66 Howell Instruments, Inc. Privately held small business founded in 1951 Fort Worth, TX HQ’s with 117,000 SF engineering, manufacturing & production facilities Aerospace electronics expertise: cockpit instrumentation, engine health monitoring, jet engine test equipment & data acquisition systems

7. 77 Howell Products Engine Testers Monitors Indicators

8. 8 Manufacturing Overhead Solder Reflow Oven X-ray Machine Component Storage HALT/HAS

9. 9 Manufacturing Overhead CNC FabricationCNC Lathe Laser EngraverInjection Molding Machine

10. 10 Manufacturing Overhead Machine ShopMetal Fabrication PCBDEK Solder Screen Printer

11. 11 Selling, General & Administrative

12. 12 Standard Costs Material CostsLabor Costs Overhead Costs Howell Instruments utilizes a Standard Cost accounting method, which is a predetermined cost for materials and for labor during normal operations Resistors Capacitors PCB’s Wire And other direct materials Inspectors Assemblers Machinists Painters Technicians Building Equipment Utilities Prod. Salaries Maintenance SG&A Certification Costs Engineering

13. 13 Accounting Measure EquationMultiplierActivity Base MOH Rate ** 650%Labor Cost SG&A Rate ** 142%Manufacturing Cost Markup Rate15% Direct Labor Rate$20 ** Fixed Cost NOT Controllable by Managers PMOH = Predicted Manufacturing Overhead PSG&A = Predicted Selling, General and Administrative

14. 14 H9200-XXX Indicator 2000 Technology High Cost of Production Time15.19 hours Material$2008

15. 15 H9200-XXX Indicator Direct Material$2,008.00 Direct Labor Hours15.19 Labor Cost$20303.80 Mfg OH650%1,974.70 Total Mfg Costs4,286.50 SG&A142%6,096.36 Total Costs10,382.86 Markup15%1,557.43 Sales Price$11,940.28 Fixed Rates not controllable by Managers Time and Materials is controllable by Managers

16. 16 H9900A-XXX 2012 Technology Low Cost of Production Time5.35 hours Material$375

17. 17 H9900A-XXX Direct Material$375.00 Labor Hours5.35 Labor Cost$20.00107.00 Mfg OH650%695.50 Total Mfg Costs1,177.50 SG&A142%1,674.67 Total Costs2,852.17 Markup15%427.83 Sales Price$3,279.99 Reduce Direct Labor Hours and Materials Reduces Sales Price $8660.29 Savings!

18. 18 Price Quantity Demanded Conclusion Operationally we cannot control MOH and SG&A We manage the costs that we can control –Direct Labor Hours –Direct Materials Expansion into new Markets