Reference no: EM132624718

It is difficult to distinguish between direct and indirect labor in many modern manufacturing plants. An employee might participate in a design review team, work on maintenance, and produce components, all in the same day. Moreover, these plants are organized as a "factory within a factory," meaning that each production line might be dedicated to a single product line. Thus, rather than grouping like machines together, the factory is organized around production processes for an individual product line. Each line would have its own labor, supervisors, production engineers, and so on, enabling it almost to act as a separate factory. This organization contrasts sharply with traditional systems where many product lines might share the machines.

Required:

Problem 1: What implication does the modern organization have for the traceability of costs? How does this change affect the controllability of costs for decisions that affect the volume of production? Decisions to add or drop products?