1. Introduction to Managerial Accounting and Job Order Costing 2. Process Costing

I’m working on a Accounting exercise and need support.

Hi!

So this is the first discussion that I have to post by tonight:

1. Read the following scenario and then thoughtfully discuss the questions.

Roe and Adler, LLC produce fabric covers for passenger seats used in small private airplanes. Each cover is customized with the customer’s choice of size, color, fabric, and logo, in addition to meeting FAA standards and requirements. Roe and Adler uses a job cost system and allocates manufacturing overhead based on direct labor hours. These are the most recent cost estimates per seat:

Direct materials 29.00
Direct labor 5.00
Manufacturing overhead 9.00
Total per seat $43.00

Rose and Adler, LLC received an order in January for 48 seat covers. At the time of this order, the selling price of one seat cover was $107.50. Delivery of the seat covers is due in April. Since the original order was placed, the same company has placed an additional order for 12 more seat covers to be delivered at the same time as the original 48 seat cover order.

Since the original order was placed in January, unforeseen world events have occurred that have increased the costs of making the covers. The first issue is an increase in the price of dye used in the fabric for the seat covers. The second issue is that a new textile manufacturer is opening nearby and offering to pay a higher wage and aggressively seeking to hire experienced labor.

Due to these events, these are the new costs estimates:

Direct materials 30.00
Direct labor 6.50
Manufacturing overhead 11.70
Total per seat $48.20

Discuss

  • Do you agree with the cost analysis for the second order? Explain your answer:
  • Should the two orders be accounted for as one job or as two jobs?
  • What sales price per cover should they set for the second order? Explain why you selected this price, as well as the advantages and disadvantages of this price.

Here is the discussion scenario that isn’t due until next week:

ead the following scenario and then thoughtfully discuss the questions.

Maredo Leather Company manufactures top quality leather used by Roe and Adler, LLC in their manufacture of airplane seat covers. The production manager at Maredo has been under pressure from the company president to reduce the cost of conversion. In spite of several attempts to reduce conversion costs, they have remained more or less constant. Now the manager is faced with an upcoming meeting with the company president, where he will have to explain his failure to reduce conversion costs. The manager goes to the company controller with the following request. He explains that he is under pressure to reduce cost in the production process, but there is no way to reduce material costs. He explains that if he can just show a little progress in his meeting with the president then he can buy some time to try some other cost-saving measures. He asks the controller to raise the estimate of the percentage of completion of the ending inventory for the month to 60 percent. This will increase the number of equivalent units and the unit conversion cost will be a little lower. Use the following to answer the questions below:

October 1 Work-in-Process 400 units

Conversion 25% complete

Inventory costs as of Oct 1:

Leather $990
Dye 260
Conversion costs 300
Total $1,550

During October 7,600 leather fabric pieces were placed into production. A total of 7,000 leather fabric pieces were completed. The work-in-process inventory on October 31 consisted of 1,000 leather fabric pieces with were 50 percent complete as to conversion. The costs charged to production during October were:

Leather $19,990
Dye 5,250
Conversion costs 20,700
Total $45,850

Discuss

  • By how much would the managers suggested manipulation lower the unit conversion costs?
  • What should the controller do?
  • Discuss this situation in terms of ethics and cite specific ethical standards for managerial accountants.

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