Get Instant Help From 5000+ Experts For
question

Writing: Get your essay and assignment written from scratch by PhD expert

Rewriting: Paraphrase or rewrite your friend's essay with similar meaning at reduced cost

Editing:Proofread your work by experts and improve grade at Lowest cost

And Improve Your Grades
myassignmenthelp.com
loader
Phone no. Missing!

Enter phone no. to receive critical updates and urgent messages !

Attach file

Error goes here

Files Missing!

Please upload all relevant files for quick & complete assistance.

Guaranteed Higher Grade!
Free Quote
wave

You have just been hired as an accountant by GoodStyle Furniture, a manufacturer of specialty, hand-made furniture based in South Australia. The furniture produced by Goodstyle is in two ranges, Modern and Classical. The two ranges are different in design, but both are high quality, hand-made furniture and are priced accordingly. The owner of the company, Brenton Pryce, has always believed in pricing a quality product based on how much their larger competitors are pricing theirs. His argument has been that “our product is as good, if not better, than the mass producers of furniture, so we should be charging at least as much, if not more, than what they charge”.

When you arrived at work for the first time, you learnt that the though the company has been in existence for the last twelve years, they have never had an accountant. The accounts were typically prepared by the Laura Peters , secretary of Brenton Pryce and Tom Nichols, a part-time accountant who came in once or twice a month. Tom has informed Brenton that he could no longer spare the time to come in and has suggested the need for an accountant on a full time basis, which is why you have been hired. Brenton, though, is still not convinced of the need for a full time accountant. “Look, why do I need a full-time accountant? At the end of the day, all I need to do is total up my revenues, total up my expenses and the difference is my profit. Do I really need to understand my product costs? What is the purpose of that? It’s not like I can lower my prices if my product costs are lower. I just follow the big guys like Hardly Normal and Super A-mart and price my product according to their prices. Why do I need to know what my product costs are?” asked Brenton.

Laura, who has been the secretary cum bookkeeper (of sorts) since the day the company started has prepared some information for you. Trying to be helpful, she has alphabetised the accounts. “I do not know much about accounting,” said Laura. “But Tom has said that we need a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold, whatever that means. I have last year’s accounts for you, so could you please prepare those schedules or whatever and get it to Brenton?” The alphabetised list of accounts can be found in Appendix A.
Four days into your work, there was a fire over the weekend in the main office that stored the accounts. The manufacturing facility was not affected and work could go on, however, most of the information that was for the current year’s accounts was damaged and only partial fragments were readable. Luckily your work on last year’s accounts were not affected as you had brought them home to complete and was still in process of completing them.

“You need to get me back all the information that’s now lost! My creditors want to see that information and I need you to work on it asap” said Brenton
Sifting through ashes and interviewing selected employees, you have worked up some additional information:

a) Laura remembers clearly that the predetermined overhead rate was based on 60,000 direct-labour hours to be worked for the year and $180,000 in overhead costs. (“Tom mentioned this before he left,” Laura said. “No idea why it is important, but if it can help you, good luck”.)

b) The work in process balance was $4,500 at 1st April . Also the production supervisor’s cost sheets showed only one job in process on 30th April. Materials of $2,600 had been added to this job, and 300 direct labour hours had been expended at $6 per hour on this job.

c) The accounts payable are for raw material purchases only, according to Laura. She clearly remembers that the balance in the account on 1st April was $6,000. Checking with Brenton for his cheque stubs, payments of $40,000 were made to suppliers during April. (All materials used were direct materials.) .The balance in the Accounts Payable account was $8,000 at 30 April .

d) A charred piece of the payroll ledger shows that 5,200 direct labour hours were recorded for the month. Laura has confirmed that there were no variations in pay rate (i.e. all employees were paid $6 per hour.)

e) Records in the warehouse indicate that the finished goods inventory totalled $11,000 on 1st April.

Also the finished goods balance was $16,000  on 30th April .

f) The balance in the Raw Materials account was $12,000 on 1st April.

g)Actual Manufacturing overhead incurred during April was $14,800.

h) From another charred piece of paper, you discerned that the cost of goods manufactured for April was $89,000.

You are now ready to and give Brenton the information he needs before you lose your job! When you went in to tell him that you can now start working on the information, Brenton tells you that he has spoken to Tom (their previous part-time accountant) and that the following information are required: “Tom says we need the following information: Work in process at the end of April, raw materials purchased in April, Overhead applied, Cost of goods sold in April, and Raw materials used in April. He also suggested that we should be looking at whether the overhead was over- or under-applied, whatever that means. “

Required:

Prepare a report (no more than 10-pages) for Brenton Pryce that addresses the following:

a) The purpose of a product costing system.

b) Preparation of a Schedule of Cost of Goods Manufactured and Cost of Goods Sold for last year. (The schedules may be in the appendix). Explain why some items have been excluded from the schedules.

c)An Income Statement for last year assuming that tax is charged at 30% on Income before tax

d) Determine the values for the following:

i. Work in Process at the end of April;
ii. Raw materials purchased in April;
iii. Overhead applied in April;
iv. Cost of Goods sold in April;
v. Raw materials used in April; and,
vi. Over- or under-applied overhead in April.

e) Discuss how overheads can be over- or under-applied and how the company should deal with the over- or under-application.

Schedule  A

Last years accounts

Administrative salaries                   

$2,400

Advertising expense 

1,200

Depreciation – factory building

800

Depreciation -- factory equipment

1,600

Depreciation -- office equipment 

180

Direct labour cost 

21,900

Raw materials inventory, beginning

2,100

Raw materials inventory, ending 

3,200

Finished goods inventory, beginning 

46,980

Finished goods inventory,. ending

44,410

General liability insurance expense

240

Indirect labour cost 

11,800

Insurance on factory 

1,400

Purchases of raw materials 

14,600

Repairs and maintenance of factory 
Sales                         110,000                                

900

Sales salaries 

2,000

Taxes on factory 

450

Travel and entertainment expense 

1,410

Work in process inventory, beginning 

1,670

Work in process inventory, ending 

1,110

Part (B)

Cost of Goods Manufactured & Cost of Goods Sold

Cost sheet of new goodstyle furniture

Particulars

$

$

Raw material consumed

Opening stock

$2,100.00

Add

Purchase

$14,600.00

Less

Closing stock

$3,200.00

$13,500.00

Add

Direct labor

$21,900.00

Prime cost(note 1)

$35,400.00

 

Add

Indirect labor

$11,800.00

Add

Insurance factory

$1,400.00

Add

Rates on factory

$450.00

Add

Repairs & maintaince of factory

$900.00

Add

Depreciation fac - building

$800.00

Add

Depreciation fac - equipment

$1,600.00

Works cost(note 2)

$52,350.00

Add

Opening wip

$1,670.00

Less

Closing wip

$1,110.00

Factory overhead(note 3)

$52,910.00

Office & administrative expense

 

Add

Administrative salaries

$2,400.00

Add

Depreciation office equipment

$180.00

Add

Travel & entertainment exps

$1,410.00

(A) 

Cost of production(note 4)

 

$56,900.00

 (cost of goods manufactured)

Add

Opening stock of finished goods

$46,980.00

Less

Closing stock of finished goods

$44,410.00

(B) 

Cost of goods sold(note 5)

 

$59,470.00

 (cost of goods sold)

Selling

 

Add

Advertising exps

$1,200.00

Add

Sales salaries

$2,000.00

Cost of sales(note 6)

 

$62,670.00


Note 1: Prime Cost: Under prime cost we include three basic elements.

  1. Direct Material-We include the raw material consumed part
  2. Direct Labor- Labor directly related with the production of goods and services
  3. Direct Expenses- Expenses directly related with production

Note 2: Works Cost: Under works cost we include all indirect expense related to factory. These are factory insurance, fuel, depreciation, etc

Note 3: Factory Overhead: It is the aggregate of Prime cost and Works cost.

Note 4: Cost of Production: This is the actual cost of production of furniture. It requires adjustment of opening and closing Work In Progress

Note 5: Cost of Goods Sold: When we adjust the opening and closing stock of finished goods we get Costs of Goods Sold

Note 6: Cost of Sales: It includes all the expenses related to selling the goods and services. These are advertising expense, sales promotion expense, salesman salaries, etc

The only thing that is excluded from the cost sheet is General Liability Insurance Expense. It does not have any connection with the production. It cannot be charges directly to the products and services produced. The other items that are to be excluded from the schedules are financial expenses like interest, legal expenses like filling suit in the court, etc. The reason being that they do not have any connection with the production.

Part (C)

Income Statement for Goodstyle Furniture

Particular

Amount

Sales

$1,10,000.00

Less: total cost

Direct material

$13,500.00

Direct labor

$21,900.00

Indirect labor

$11,800.00

Insurance factory

$1,400.00

Rates on factory

$450.00

Repairs & maintaince of factory

$900.00

Depreciation fac - building

$800.00

Depreciation fac - equipment

$1,600.00

Administrative salaries

$2,400.00

Depreciation office equipment

$180.00

Travel & maintaince exps

$1,410.00

Advertising exps

$1,200.00

Sales salaries

$2,000.00

Changes in w.i.p.

$560.00

Changes in stock of finished goods

$2,570.00

General insurance liability

$240.00

Total cost

$62,910.00

Profit before tax

$47,090.00

Tax @ 30%

$14,127.00

Profit after tax

$32,963.00

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2016). Cost Sheet And Income Statement For Goodstyle Furniture. Retrieved from https://myassignmenthelp.com/free-samples/overhead-costing.

"Cost Sheet And Income Statement For Goodstyle Furniture." My Assignment Help, 2016, https://myassignmenthelp.com/free-samples/overhead-costing.

My Assignment Help (2016) Cost Sheet And Income Statement For Goodstyle Furniture [Online]. Available from: https://myassignmenthelp.com/free-samples/overhead-costing
[Accessed 02 March 2024].

My Assignment Help. 'Cost Sheet And Income Statement For Goodstyle Furniture' (My Assignment Help, 2016) <https://myassignmenthelp.com/free-samples/overhead-costing> accessed 02 March 2024.

My Assignment Help. Cost Sheet And Income Statement For Goodstyle Furniture [Internet]. My Assignment Help. 2016 [cited 02 March 2024]. Available from: https://myassignmenthelp.com/free-samples/overhead-costing.

Get instant help from 5000+ experts for
question

Writing: Get your essay and assignment written from scratch by PhD expert

Rewriting: Paraphrase or rewrite your friend's essay with similar meaning at reduced cost

Editing: Proofread your work by experts and improve grade at Lowest cost

loader
250 words
Phone no. Missing!

Enter phone no. to receive critical updates and urgent messages !

Attach file

Error goes here

Files Missing!

Please upload all relevant files for quick & complete assistance.

support
Whatsapp
callback
sales
sales chat
Whatsapp
callback
sales chat
close