Cost Accounting Assignment
Cost Accounting Assignment
Cost Accounting Assignment
b) Identify the major elements of the value chain for the Paper Products Factory.
i. Purchasing- involve relationships with suppliers and include all the activities required to receive,
store, and disseminate inputs.
ii. Engineering and Design-
iii. Manufacturing (Warehouse, Materials Handling, Cutting, Assembly, Finishing)- transform inputs
into outputs (products and services).
iv. Quality Control- Responsible for ensuring that products are made according to specification and
checking the accuracy of the final jobs.
v. Sales- activities inform buyers about products and services, induce buyers to purchase them, and
facilitate their purchase.
vi. Customer Service- includes all the activities required to keep the product or service working
effectively for the buyer after it is sold and delivered.
(Reference: Porter’s Value Chain, https://www.ifm.eng.cam.ac.uk/research/dstools/value-chain-/)
d.)Separate the list of costs identified as product or period costs. Further classify product
costs as direct material, direct labor, and manufacturing overhead.
Direct materials:
Paper
Stickers
Direct labor
Cutting/Assembly/Finishing
Manufacturing Overhead:
Indirect Materials
Staples
Tape
Indirect Labor
Quality control labor
Supervisory labor
Other indirect labor (stockroom, materials handling)
Other Manufacturing Overhead:
Depreciation on tape machines
Depreciation on stapling machines
Depreciation on cutting machine
Depreciation on the factory portion of the building
Taxes on the factory portion of the building
Assignment 2:
a.) Trace the direct material and direct labor amounts used for each job and mark it on the Job Cost
sheet. Your job consisted of 15 Hats and 10 Chains. The amounts of materials for the job can be
found on the Materials Requisition Report (not included) and the Labor is found on the Labor
time records (not included). These amounts have been input onto the Job Cost Sheet for you. See
Exhibit 3 – Partially Completed Job Cost Sheet.
b.) Using one overhead cost pool and units as the cost driver, allocate the overhead to
each job.
c.) Why is the process of allocating overhead different from tracing direct material
and direct labor costs?
At the beginning of the accounting period, managers estimate the amount of
manufacturing overhead costs they estimate to incur.
They then determine a basis on which they will allocate the overhead costs to
their many different products.
The process of distributing this cost to products is called cost allocation. The
process of allocating overhead reduces the Manufacturing Overhead account
and increases the Work in Process Inventory account.
Direct materials and direct labor are traced to a product or service
provided. Tracing is the process of specifically identifying the material or labor
cost with a particular product or service.
Direct costs, by definition, are easy to identify with a particular product or
service.
d.) Complete the Job Cost sheets by identifying the total product cost for each job.
Next compute the cost for a unit of paper hats and a unit of paper chain.
e.) What do you think is the cause of the increase in unit costs for paper hats?
f.) Matt Brady has asked you help him identify some other methods for allocating
overhead in the determination of product cost. Identify at least two other possible
ways of allocating the overhead to each job. Recalculate the product cost and targeted
selling price of each job and each unit using the two methods of allocating overhead
identified in (e).
g.) What are the advantages and disadvantages of the methods identified? Which
method would you recommend?
h.) Write a memo to Brian Clark summarizing your findings and recommendations.