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)Executive SummarySiemens Electric Motor Works was the only factory in West Germany to produce electric motors after World War II. Due to the lower labor costs of its competitors, management decided to produce a low volume of specialty A/C motors rather than a high volume of standard motors. Therefore, to adapt to the new strategy, EMW applied a new cost system instead of the traditional cost system due to some problems. First, the traditional costing system is unable to provide correct information when calculating the costs of supporting custom engines. Second, the traditional cost system is unable to reflect the relationship between the increase in support costs and the change in the product mix (“Siemens Electric Motor Works, 1997”). When comparing two cost systems, the new system added two new cost pools based on the traditional one, which typically assigned support costs to the cost pools of materials, labor, and related incurred costs. The old system did not reflect the increasing costs of supporting specialty products, so it was unable to reduce costs and provide the plant with good choice in how to choose profitable orders. From our calculations (Figure 3), the new system transferred design costs and administrative costs to the order processing cost pool and the special components cost pool in a similar way. This shows that the new system is clearer and more efficient in terms of cost reduction, and that the whole half of the paper was mainly driven by order processing costs and special component costs. Therefore, in the new system, the costs in each support-related cost pool have been removed into these two new cost pools. 6,300 engineering costs were transferred to order processing costs and 27,000 administrative costs were transferred to special component costs. Therefore, the base cost of the engine and the cost of special components would be more accurate, and the financial manager would not underestimate or overestimate the value of each product. Last but not least, since each of the five engines has different and accurate total costs compared to the costs of the traditional costing 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 it would lose some less profitable sales to competitors.