Bridgeton's management accounting system, as presented, appears to lack the detail necessary for efficient analysis. The sections used are sales, direct material, direct labor, and overhead by account number, each divided into individual accounts and added together to find the totals. There is no separation between fixed and variable costs in any of the accounts, making it difficult to analyze exactly where operations cost money and, therefore, how they could be improved. The presentation of the information groups together all sales and different cost categories and does not include the analysis of individual products. Products are analyzed (classified) based on their costs, without consideration of the revenues associated with these products and without a true understanding of the overheads applied to each product. Overhead costs are applied to accounts based on the labor and materials of the company as a whole, rather than using considerations associated with individual products. The presentation of the material is in dollars only. Overhead is applied to products as a percentage of the direct labor dollar cost. Factory profit for each year is obtained by subtracting direct material, direct labor, and direct overhead from total sales. The overhead percentage is calculated at the same time as the budget and is applied as a single overhead pool for each model year. In 1987 the consultancy company used 435% of the direct labor costs for its study; the budget was actually 437% (OH/DL=107,954/24,682). A similar percentage applies in the following year (109890/25294=434.5%). However in the following two years, after the adoption of outsourcing of oil pans and mufflers, the allocation of overhead costs to... middle of paper... doors and manifolds. Mufflers directly contributed $28,911 in 1987 and $30,975 in 1988 and oil pans contributed $36,997 and $39,566. To improve the ACF system, you need to consider these numbers. A product line should not be eliminated simply because it is not world class; if it continues to contribute, it's probably a positive product, assuming it doesn't significantly damage the company's image. It is difficult to determine exactly whether it contributes because we do not know the fixed and variable parts of manufacturing overhead. Employee interviews coupled with regression analysis using multiple years of data, possibly without the disruption of outsourcing, could help effectively estimate these costs. It is always dangerous to make manufacturing/outsourcing and other decisions based on allocated manufacturing overhead if these are not managed properly.