You, the managerial accountant, are asked by the CFO (Mr. Smith) of Wilson–West Manufacturing (a new company) to set up a product costing system. The following are the types of expenses that will be included:
direct labor
direct materials
utilities
depreciation
maintenance
insurance on the equipment
rent on the plant
administrative salaries
rent for the office
In a memo format, explain to Mr. Smith and the president what will be included in product costing.
Explain what is involved in a product costing system.
Explain why Wilson–West Manufacturing needs to have a product costing system.
Allocate the above expenses as fixed, mixed, or variable expenses.
Prepare calculations for the following, and explain your computations:
Variable cost: The unit rate is $0.25, and the actual hours used for manufacturing are 15,000.
Mixed cost: The unit rate is $0.25, actual hours are 10,000, and the fixed cost is $5,000 per month.
Total cost: Use your calculations from above.
Explain this to Mr. Smith who will prepare these calculations on a monthly basis.
Assignment TWO
1–2 Excel spreadsheets
Details:
Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time.
You are a fresh accounting graduate. You have landed a job with a big 3 accounting firm. The first day at your job, your manager approaches you: “Hi Bill! Welcome aboard. Hope you like your new cubicle. Have you met everyone? By the way, you will be working with me from tomorrow on Long House Company. This is an important client. They have sent me some information on their projects. Can you provide a report that answers all of the questions listed below? By the way I need it by tomorrow morning at 8 a.m.!”
Project
Total Contract Price
Billings Through 12/31/12
Cash Collections Through 12/31/12
Contract Costs Incurred Through 12/31/12
Estimated Additional Costs to Complete
A
$200,000
$100,000
$80,000
$120,000
$90,000
B
250,000
50,000
45,000
40,000
180,000
C
180,000
180,000
150,000
120,000
0
D
100,000
10,000
5,000
80,000
20,000
E
140,000
120,000
110,000
100,000
10,000
870,000
460,000
390,000
460,000
300,000
Prepare a schedule of gross profit (loss) to be reported.
Prepare the entries for projects A and B only.
Assignment THREE
Wilson-West Manufacturing Company is trying to determine which costing method to implement in its new manufacturing plant. The CFO, Mr. Smith, asked you, his new managerial accountant, to explain the three following costing systems:
Activity-based costing (ABC)
Job order costing
Process costing
Create a 1–2 page table, comparing the following for each of the 3 costing systems:
What are the 3 characteristics of the system?
Give 2 examples of a product or service that would be accounted for by each system. Explain why you chose this product or service as your example.
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