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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Basic Product Costing: Ethical Issues
Old Tyme Soda produces one flavor of a popular local soft drink. It had no work in process on October 31 in its only inventory account. During November, Old Tyme started 10,000 barrels. Work in process on November 30 is 1,200 barrels. The production supervisor estimates that the ending work-in-process inventory is 30 percent complete. An examination of Old Tyme’s accounting records shows direct material costs of $18,072 and conversion costs of $20,400 for November. All production is sold as it is produced.
Required
a. Compute cost of goods sold for November.
b. What is the value of work-in-process inventory on November 30?
c. The president tells the controller that stock analysts expect higher income for the month and asks the controller to change the production manager’s estimate about the ending work-in- process inventory.
(1) If the controller wanted to comply with the president’s request would he raise or lower the estimated percentage complete from the 30 percent estimate of the production supervisor? Explain.
(2) What should the controller do?
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Cost accounting system
It is a system designed to report the cost of products and services. Material, labor and overhead costs are allocated to determine unit costs. Cost accounting system comprises of various types of formats, forms, procedures, reports and records. This can be maintained independently and can be part of formal accounting system also.
Cost accounting systems are used by both manufacturing and service firms to find the unit costing of their products or service. There are two types of cost accounting systems like job order costing system used for personalized products or services and process costing system used for large size of identical products. Some companies may use combination of job order costing and process costing system to fit its particular needs.
Basic cost flow model
Basic cost flow model is used as framework for recording the cost by all types of firms.
It is an inventory equation that is used to find out missing information: -
Basic cost flow model has four components like beginning balance, transfer in, transfer out and ending balance.
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