Caselet 3 Comprehensive Evaluation Gamespanelaquitevisrapadasalgado

 

 

ACTIVITY TITLE

Caselet 3 COMPREHENSIVE EVALUATION

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Group Members 1. Game Games, s, Ches Cheska ka C. 2. Pane Panela la,, Je Jeri rich cho o 3. Quitev Quitevis, is, Tito Sim Simon on Q. 4. Rapa Rapada da,, Jana Jana Ma Maee S. S. 5. Salgad Salgado, o, Love Lovely ly Jaze Jaze A.

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Contents Of the Presentation  

Alternate Problems Business Cases

CONTENTS

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Alternate Alternatee Problem A Alternat A Pocket Umbrella, Inc., is considering  producing a new type of umbrella. This new pocket-sized umbrella would fit into a coat pocket or purse. Classify the following costs of this new product as direct materials, direct labor, manufacturing overhead, selling, or administrative.

Problem

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ANSWER 

 

1. Co Cost st o off ad adve vert rtis isin ing g th thee pr prod oduc uct. t. SELLING 2. Fa Fabr bric ic u use sed d to m mak akee th thee um umbr brel ella las. s. DIRECT MATERIALS 3. Maint Maintenanc enancee of cu cutting tting mach machines ines u used sed to cut th thee umb umbrell rellaa fabr fabric ic so iitt wil willl fit the umbrella frame. MANUFACTURING OVERHEAD DIRECT LABOR  4. Wages W ages of workers assemble the product. ADMINISTRATIVE EXPENSE 5. President’s salary. who 6. The salary of the supervisor of the people who assemble the product. FACTORYOVERHEAD 7. Wages Wages of the product tester who stands in a shower to make sure the umbrellas do not leak. DIRECT LABOR  8. Cost of market research survey. SELLING 9. Salary of the company’ company’ss sales managers. SELLING 10. Depreciation of administrative office building. ADMINISTRATIVE EXPENSE

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Concepts and Theories

 

Direct Materials  – are materials that become part of a finished product and can be conveniently and economically traced to specific product units.  Direct Labor  – represent the amount paid as wages to those working directly on the  product. It includes all labor costs for specific work performed on products that can be conveniently and economically traced to end products.  Manufacturing Overhead  – are a varied collection of production-related costs that cannot be practically or conveniently traced directly to t o end products.  Selling  – include all costs necessary to secure customer orders and get the finished  products or service into the hands of the customer. customer.  Administrative  – include all executive, organizational, and clerical expenses that cannot logically be included under either production or marketing. 

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Alternate Alternate Problem B.

Problem

Classify the costs listed in Alternate  problem A as either product costs or period costs.

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ANSWER  1. Co Cost st o off ad adve vert rtis isin ing g th thee pr prod oduc uct. t. PERIOD COST 2. Fabric used to make the umbrellas. PRODUCT COST 3. Maintenance of cutting machines used to cut the umbrella fabric so it will fit the umbrella frame. PRODUCT COST 4. Wages Wages of workers who assemble the product. PRODUCT COST 5. President’s salary. PERIOD COST 6. The salary of the supervisor of the people who assemble the product. PRODUCT COST 7. Wages Wages of tester who COST stands in a shower to make sure the  PRODUCT umbrellas dothe notproduct leak  PRODUCT 8. Cost of market research survey. PERIOD COST 9. Salary of the company’ company’ss sales managers. PERIOD COST 10. Depreciation of administrative office building. PERIOD COST

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Concepts and Theories

 



Product costs  – are costs that are incurred to create a product produ ct that

is intended for sale to customers. Product costs include direct material (DM), direct labor (DL), and manufacturing overhead (MOH). Period costs  – include any costs not related to the manufacture man ufacture or acquisition of the product. Period costs include marketing or selling expenses and administrative or general expenses. 

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Alternate Alternate Problem C.

Problem

Presley Manufacturing Company is a  producer of music compact discs (CDs) and tapes. The following account balances are for the year ended December 31.

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ANSWER 

 

Presley Manufacturing Company Statement Ofthe Cost Ofended GoodsDecember Sold Manufactured For year 31

  Direct Materials used

Direct labor  Factory overhead

Total manufacturing cost Add: Work in process, January 1 Cost of goods put into process Less: Work in process, Dec. 31 Cost of goods manufactured

Materials inventory, January 1 Add: Purchases Total available for use

$14,000 216,000 230,000

Less: Materials inventory, December 31

44,000

    Indirect labor Depreciation expense-Manufacturing equipment Manufacturing supplies expense Rent expense-Factory Other manufacturing overhead      

      $186,000 468,000

36,000 50,000 40,000 28,000 126,000

280,000 934,000 20,000 954,000

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56,000 $898,000

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ANSWER 

 

Presley Manufacturing Company Statement Of Comprehensive Income For the year ended December 31

  Sales Less: Cost of goods sold

$1,400,000   Cost of goods manufactured Add: Finished goods, January 1 Total goods available for sale

$898,000

 

128,000 1,026,000

Less: Finished goods, December 31

  934,000

92,000 Gross profit Less: Selling and Administrative Expenses

466,000

 

  Selling expense

72,000

Administrative expenses

60,000

 Net income  

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Concepts and Theories

 

of Cost of Goods Manufactured  – refers re fers to t o a schedule or statement st atement that shows the t he total t otal production costs of the goods that were completed during an accounting period. In other words, it includes the costs of direct materials, direct labor, and manufacturing overhead that are included in the products that moved from the manufacturing area to the finished goods inventory during the accounting period. The statement of cost of goods manufactured supports the cost of goods sold Statement

figure on the income statement. Income Statement  – shows the business's income, expenses, gains, and losses over a period. The end product of these transactions is net income or loss. It includes the following: O Net sales (sales or revenue) - This is the value of a company's sales of goods and services to its customers. O Cost of products sold (COGS) - is the expense incurred for labor, raw materials, and manufacturing overhead used in the production of goods. O Gross profit (gross income or gross margin) : provides the resources to cover all of the company's other expenses and is not only just the difference between net sales and the cost of sales. O Selling, general, and administrative expenses (SG&A): this is the company's operational expenses. oIncome taxes: As stated, the income tax amount has not actually been paid. This is an estimate or an account that has  been created creat ed to cover the th e amount a company compan y expects to pa pay y in taxes. O Net income: This is the bottom line, which is the most commonly used indicator of a company's profitability.

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Critical Business Decision Case A.

Thinking

A Companies often do work on a cost-reimbursement basis. That is, Company B reimburses Company A for the cost of doing work for Company B. Suppose your company has a contract that calls for reimbursement of direct materials and direct labor, but not overhead. Following are costs that various organizations incur; they fall into three categories: direct materials (DM), direct labor (DL), or overhead (OH).

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ANSWER 

 

COST

CATEGORIES

Glue used to attach labels to bottles containing a patented medicine.

OH

Comp Compre ress ssed ed air air use used d in in ope opera rati ting ng pa pain intt sspr pray ayer erss ffor or St Stud uden entt P Pai aint nter ers, s, a com compa pany ny that that pain paints ts hous houses es and and apa apart rtme ment nts. s.

DM

Insurance on a factory building and equipment.

OH

A production department supervisor’s salary.

OH

Rent on factory machinery.

OH

Iron ore in a steel mill.

DM

Oil, gasoline, and grease for forklift trucks in a manufacturing company’s warehouse.

OH

Services of painters in building construction.

DL

Cutting oils used in machining operations.

OH

Cost of paper towels in a factory employees’ washroom.

OH

Payroll taxes and fringe benefits related to direct labor.

DL

The plant electricians’ salaries.

OH

Crude oil to an oil refinery.

DM

Copy editor’s salary in a book publishing company.

DL

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ANSWER 

 

Based on the reimbursement contract, my company included direct materials and direct labor to reimburse. Among the answers above, opposing attorneys might successfully dispute on the salaries of plant electrician’s and salary of  book copy editors because of wrong labelled or classification or categories under that item. Some considerations may use to questions like the salaries of employees covered under the expenses of overhead. The salary of painters is included in DL because some companies included it to the contract on construction of building. Some considerations use to question the case like the salaries of employees covered under the expenses of overhead that is usually under the direct labor.

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Writing Writing Assignme Assignment nt B.

Assignment

Refer to Presley Manufacturing company, Alt Problem C. Assume the newly hired executive is a whiz at marketing,  but a person whose eyes glaze ov over er at the sight of a number. The executive wants you to explain the financial results for the year in words. Essentially, assume the executive has not seen the financial statements prepared. What would you say to convey the message in the financial statements?

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ANSWER  Based from the financial statements of Presley Manufacturing Company, it has $934,000 total manufacturing costs composing of $186,000 direct materials used, $468,000 direct labor costs and P280,000 factory overhead. Under work in process, there was an increase of $36,000 which came up a total cost of goods manufactured, amounting to $898,000. Meanwhile, there was a decrease happened in finished goods inventory of $36,000. They were all accounted for the period which resulted a company cost of goods sold of $934,000. At last, for the year ended December 31, the company has earned a total amount of $334,000, after deducting the cost of goods sold and operating expenses from the sales got by the company amounting to $1,400,000.

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