Question

Ch. 15 Case

 

Assume that you are preparing for a second interview with a manufacturing company. The company is impressed with your credentials but has indicated that it has several qualified applicants. You anticipate that in this second interview, you must show what you offer over other candidates. You learn the company currently uses a periodic inventory system and is not satisfied with the timeliness of its information and its inventory management. The company manufactures custom-order holiday decorations and display items. To show your abilities, you plan to recommend that it use a cost accounting system.

Required

In preparation for the interview, prepare notes outlining the following:

1. Your recommendation and why it is suitable for this oompany.

2. A general description of the documents that the proposed cost accounting system requires.

3. How the documents in part 2 facilitate the operation of the cost accounting system.

Grading rubric: 150 words minimum accurate content 90%; correct grammar and spelling 10%.

Answer 1

(1) Notes on the cost accounting system recommendation and its effectiveness:

It is recommended to replace the general accounting system with the cost accounting system through the introduction of job order cost accounting system. The introduction of the new cost information system will provides detailed information about the manufacturing of products. However, the new system provides information on timely and accurately.

A job order costing system is:

(a) Appropriate for businesses that produce goods made-to-order or stock items that are produced at varying points in time.

(b) Appropriate for discontinuous production of goods.

(2) Note on general description of the documents that the proposed cost accounting system requires:

Various documents for acquisition, use and requisition of materials are required in the new costing system. Further, allocation of labor and overhead costs and sale of finished goods should be supported with proper documents. The unsold finished goods should be properly documented.

(3)

The job cost sheet specified by the new costing system accumulates various cost of goods used for production for each specified job or job lot.