BYP 2-3 MANAGERIAL ANALYSIS
1. (a) Work in Process Inventory ……………………….. 25,000
and Raw Materials Inventory is overstated.
2. (a) Sales Bonus Expense ………………………………. 12,000
overhead to be understated. This affects Cost of Goods Sold, since
the over- or underapplied balance is closed out to Cost of Goods
3. (a) Factory Labor ………………………………………….. 120,000
are understated.
BYP 2-3 (Continued)
4. (a) Manufacturing Overhead …………………………... 3,000
(b) Both the income statement and balance sheet are affected. If units
that were in process during the month have been sold, then in the
income statement Cost of Goods Sold is overstated, Income Tax
Expense is understated, and net income is understated. This causes
BYP 2-4 REAL-WORLD FOCUS
(a) The advantages of job order costing include the following:
1. Accurate costing results because actual costs of direct materials
2. A comparison of actual costs with costs estimated in the company’s
efficiency.
3. Cost data on specific jobs may be useful to management in bidding
4. Accurate costs are assigned to work in process and finished goods
inventories.
5. Job costing enables management to assess the relationship of the
cost of goods sold for each job to the sales price of each job. The
(b) Products in job order costing are usually custom-made to customer
specifications so that a sale is assured prior to the start of the manu-
Products in process costing are relatively homogeneous such as
boxes of cereal, bottles and cans of soda, jars of peanut butter, quarts of
BYP 2-5 REAL-WORLD FOCUS
(a) Candidates for the CMA or CFM Certificate must complete two continuous
years of professional experience in management accounting or financial
(b) CMAs, CFMs, and candidates who have completed the CMA and/or
the CFM examination but have not yet met the experience requirement,
are required to maintain their proficiency in the fields of management
accounting and financial management. This includes knowledge of new
ethics-related.
A broad range of subjects may be included in the programs for which
hours of credit will be given. The subjects should be related to the
BYP 2-6 COMMUNICATION ACTIVITY
Williams Company
Date
Nancy Kopay
123 Cedar Lane
Altoona, Kansas 66651
Dear Ms. Kopay:
information helpful.
Thank you also for your questions about our overhead costs. We do try to
provide our customers with as much information as possible, but we cannot
give detailed information on overhead costs. The cost of providing such
information is prohibitive.
overhead are only payable once or twice a year, such as insurance and taxes.
When we use an estimated rate, we are able to allow for those costs. A third
reason is that some costs are fixed, which means that they stay the same
in dollar amount from month to month. This category includes items such
BYP 2-6 (Continued)
you asked about.
Thanks again for your letter and for having Williams make your new cabinets!
Sincerely,
Student
BYP 2-7 ETHICS CASE
(a) The stakeholders in this situation are:
Alice Reiley, controller for LRF Printing.
The president of LRF Printing.
she does follow his instructions.
(c) Alice should continue to accurately account for cost-plus contracts
and, if challenged by the president, she should say that she is doing
BYP 2-8 ALL ABOUT YOU
the start up phase.
(b) The top ten reasons why businesses fail as cited in the books Small
Business Management by Michael Ames, and The Do it Yourself
Business Book by Gustav Berle are:
1. Lack of experience
2. Insufficient capital (money)
3. Poor location
4. Poor inventory management
BYP 2-9 CONSIDERING YOUR COSTS AND BENEFITS
Discussion guide: The situation presented is a difficult one because you are
increase substantially after the first two years. However, we should note that
it is not unusual to start a small business with some assets available to you.
So what to do? Let’s address your old truck first. You should treat the truck
as an asset owned by your business. Put it on your books at its fair value,
and depreciate it over a reasonable life. This will result in an overhead
charge. You need to cover the cost of that truck, as you will have to buy
business profitably for the first two years, you may have problems beginning
in the third year. Thus, it would seem prudent to establish a budget based
on both scenarios for the first two years. If you can charge based on your
expected costs in the future, do so. If that is not realistic, because you