Serial Problem Business Solutions Lo C2 C4 P2 Santana 281875

Serial Problem Business Solutions Lo C2 C4 P2santana Rey Owner Of

Santana Rey, owner of Business Solutions, is expanding her manufacturing operations to include computer workstation furniture. The task entails classifying manufacturing costs based on behavior and traceability, preparing a manufacturing statement, and analyzing cost classifications for the company’s financial reporting. Additionally, the assignment involves creating a detailed manufacturing statement, classifying costs as fixed or variable, product or period, and finally, preparing full financial statements for the year end and month end in accordance with accounting standards.

This comprehensive analysis helps evaluate the cost structure and financial position of the business, enabling strategic decision-making and accurate financial reporting aligned with managerial and financial accounting principles.

Paper For Above instruction

Introduction

Business Solutions, under the leadership of Santana Rey, ventures into manufacturing computer workstation furniture, necessitating a detailed cost analysis and financial reporting. Proper classification of manufacturing costs by behavior and traceability is vital for accurate managerial decision-making and external reporting. These classifications influence pricing strategies, cost control, and financial statement preparation. This paper delves into the categorization of manufacturing costs, prepares a manufacturing statement, and analyzes the costs’ behaviors and functions to provide a comprehensive picture of the company's financial health during the specified period.

Classification of Manufacturing Costs

The initial task is to classify the provided manufacturing costs by behavior (fixed or variable) and traceability (product or period costs). Here are the costs and their classifications:

• Monthly flat fee to clean workshop: This is a fixed cost as the amount remains constant regardless of production volume. It is a period cost since it relates to overall operational expenses rather than specific products.
• Laminate coverings for desktops: Variable, as costs change with the number of desktops produced. It is a product cost because it is directly involved in manufacturing the workstation furniture.
• Taxes on assembly workshop: Fixed, as taxes are often fixed based on property values or assessments, not production volume. It is a period cost.
• Glue to assemble workstation component parts: Variable, depending on the number of units assembled, making it a product cost.
• Wages of desk assembler: Variable, as wages correlate with production levels; classified as a product cost.
• Electricity for workshop: Mixed but generally treated as variable for manufacturing activities, as electricity consumption varies with production. It is a product cost.
• Depreciation on tools: Fixed, as depreciation expense remains constant regardless of production volume. It is a manufacturing overhead, thus a product cost.

Cost Classification Table

Preparation of Manufacturing Statement for January 2012

The manufacturing statement summarizes the manufacturing costs incurred during the month, the work in process, and the cost of goods manufactured. Using the provided data:

• Direct materials: $2,100
• Factory overhead: $480 (includes depreciation, electricity, taxes, etc.)
• Direct labor: $1,000
• Beginning goods in process: $0
• Ending goods in process: $530

Calculations for Cost of Goods Manufactured (COGM):

Starting with summed direct materials, direct labor, and factory overhead, the total manufacturing costs for January are:

Direct materials + Direct labor + Manufacturing overhead = $2,100 + $1,000 + $480 = $3,580

Adding beginning work-in-process inventory (none) yields total manufacturing costs available:

Cost of goods completed = Total manufacturing costs - ending work in process = $3,580 - $530 = $3,050

Final manufacturing statement for Business Solutions:

Cost Behavior and Function Analysis

Classifying costs helps in budgeting and planning. The classification shows which costs vary with production volume and which are fixed. Such understanding facilitates effective cost control and pricing strategies.

Profitability and Financial Analysis

The cost structure significantly influences profitability. The fixed costs, such as depreciation and taxes, must be covered regardless of sales volume, while variable costs change with production. Accurate classification ensures precise computation of gross margin and operating income.

Conclusion

Santana Rey’s strategic move into manufacturing computer workstation furniture necessitates precise cost classification and financial reporting. Properly segregating fixed and variable costs, as well as product and period costs, enables better financial management and strategic decision-making. The prepared manufacturing statement for January 2012 provides a clear depiction of the manufacturing costs incurred, setting the foundation for further financial analysis and managerial planning, crucial for business expansion and profitability assurance.

References

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