Case Report-Siemens Electric Motor WorksGroup Members: Yang ZOU (Mandy) (5330162) Lin SUN (Chris) (5289426) Abu Naser Lmtiaz (5271713) Wenjun WANG ( Sara) (5287925) Binglu WANG (Lucy) (5061742) Summary Siemens Electric Motor Works was the only factory in West Germany manufacturing electric motors after World War II. Due to its competitors' lower labor rates, management decided to produce a low volume of specialty air conditioning motors rather than a high volume of standard motors. As a result, in order to match the new strategy, EMW applied a new cost system instead of the traditional cost system due to some problems. First, the traditional cost system could not provide correct information when calculating costs related to custom engine support. Second, the traditional cost system is unable to reflect the relationship between the increase in support costs and the change in product mix (“Siemens Electric Motor Works, 1997”). Comparing two cost systems, the new system added two new cost pools based on the traditional system. , which generally allocated support costs between material, labor, and associated costs supported. The old system did not take into account the increasing costs of supporting specialized products, so it was not able to reduce costs and offer the factory a good choice as to how to select profitable orders. According to our calculations (Exhibit 3), the new system transferred engineering costs and administrative costs to the order processing cost pool and the special component cost pool equally. This shows that the new system is clearer and more effective in cost reduction and most of the paper......was mainly due to order processing costs and special component costs. So, in the new system, costs from each support-related cost pool have been removed to these two new cost pools. 6,300 engineering costs were transferred to the order processing cost and 27,000 administrative costs were transferred to the cost of special components. Therefore, the basic engine cost and special component cost would be more accurate and the financial manager would neither underestimate nor overestimate the value of each product. Last but not least, since each of the five drivers has different and precise total costs compared to the costs of the traditional cost system, it would be useful for managers to determine which orders should be chosen or abandoned. And it would bring more profits to companies and enough capital to invest in the future, even if some less profitable sales to competitors would be lost..