Serial Problem Business Solutions Lo C2 C4 P2 Santana Rey ✓ Solved

Serial Problem Business Solutions Lo C2 C4 P2santana Rey Owner Of

Business Solutions, owned by Santana Rey, has expanded into manufacturing computer workstation furniture. The task is to classify manufacturing costs by behavior and traceability and to prepare a manufacturing statement for the month ended January 31, 2012. Additionally, costs should be classified as fixed or variable and as product or period costs. The costs provided include monthly workshop cleaning fees, laminate coverings, taxes, glue, wages of assemblers, electricity, depreciation, and specific direct materials and factory overhead. The statement requires precise calculation based on given amounts, including beginning and ending inventories. The classification of costs helps in analyzing the cost behavior and cost control, necessary for managerial decision-making and financial reporting.

Sample Paper For Above instruction

Introduction

The economic landscape of manufacturing firms necessitates meticulous cost classification to enable effective management and accurate financial reporting. Cost behavior analysis determines how costs respond to changes in production volume, while traceability assesses the direct linkage of costs to specific products or activities. This paper examines the classification of various manufacturing costs for Business Solutions under Santana Rey's ownership, alongside preparing a comprehensive manufacturing statement for January 2012. The analysis illustrates the nuances of direct materials, factory overheads, direct labor, and other manufacturing expenses, providing insights into managerial accounting practices within a manufacturing context.

Classification of Manufacturing Costs

Cost Behavior Analysis

Cost behavior classification distinguishes between fixed and variable costs based on their response to activity level fluctuations. For Business Solutions:

• Monthly flat fee to clean workshop: Fixed (constant regardless of production volume)
• Laminate coverings for desktops: Variable (cost varies with the number of desktops produced)
• Taxes on assembly workshop: Fixed (annual or monthly tax, unaffected by production volume)
• Glue to assemble workstation parts: Variable (cost varies with the number of units assembled)
• Wages of desk assembler: Variable (wages vary with the number of hours or units assembled)
• Electricity for workshop: Mixed; primarily variable with activity levels, but could have fixed components
• Depreciation on tools: Fixed (depreciation expense allocated systematically over useful life)

Traceability Analysis

Traceability considers whether costs can be directly linked to specific products:

• Direct materials (laminate, glue): Product costs, traceable directly to specific desktops
• Wages of desk assembler: Product cost, directly attributable to production
• Factory overhead (cleaning, taxes, depreciation, electricity): Generally allocated overhead, not directly traceable but assigned to products via cost drivers

Cost Classification Summary

Manufacturing Statement Preparation

The manufacturing statement summarizes the production costs incurred during the period, beginning and ending inventories, and computes the cost of goods manufactured (COGM) and cost of goods sold (COGS). For Business Solutions in January 2012, the data provided include direct materials cost, factory overhead, direct labor, beginning WIP, ending WIP, beginning finished goods, and ending finished goods. Using these, the calculations are as follows:

• Direct materials used: 2100
• Factory overhead: 480
• Direct labor: 1000
• Beginning WIP: 0
• Ending WIP: 530
• Beginning finished goods: 0
• Ending finished goods: 380

Manufacturing costs incurred: sum of direct materials, factory overhead, and direct labor = 2100 + 480 + 1000 = 3580. The total manufacturing costs are added to beginning WIP to compute total work in process, then subtracting ending WIP computes the cost of goods manufactured.

The detailed manufacturing statement includes calculation steps for COGM, Gross Manufacturing Profit, and net operating income, adjusted for inventories.

Conclusion

Proper classification of manufacturing costs is essential for accurate product costing, financial reporting, and managerial decision-making. Understanding the behavior and traceability of costs supports strategic planning and cost control initiatives. The preparation of manufacturing statements provides a clear picture of operational efficiencies and cost structures, crucial for sustaining competitive advantage in manufacturing industries.

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