The purpose of operating a job cost subsystem for I Do Attire is to calculate and accurately record the direct costs (raw materials and direct labour) of the job so they can provide the accurate selling cost for the product they are producing to their customer, Ace Modeling Agency and so sufficient profit is made. The system allocates overheads to each job so the applied overheads are approximately the same cost as the actual overhead using the appropriate cost driver. In I Do Attire, the direct labour hours were allocated as the cost drivers because they have a lot of designers working to produce the dress.
Each job has raw materials, direct labour and overhead expenses to determine its total cost. The raw materials for I Do Attire producing a dress for Miss NZ dress are french lace fabric, pearl buttons, chiffon, organza and satin ribbon. The direct labour hour is determined in the information from the source documents such as the material requisitions forms and job cost cards. The overhead rate is including all the indirect costs such as factory maintenance and factory general expenses and it will be calculated depending on the number of hours that the business has worked which is 55 hours for this job.
The job cost subsystem ensures that the costs of each job are gathered all in one place so the total cost of each job is identified. The identified total cost ($2783.70) will then allow markup and GST ($5877.26) to be added so the appropriate cost is invoiced to the customer for the job. The job cost subsystem also allows I Do Attire to identify which types of jobs are more profitable, so I Do Attire can focus to gain more profit in that job. It also identifies the accurate cost for each job, so the appropriate cost can be pr...
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... than it should have been, having a markup rate 80% of $2783.70, totalling $5010.66. This means the overall profit decreased by the underapplied overheads and the markup of the amount. This is a custom made dress For Miss NZ which will be representing our country in competition which means it will be very unique such as having a New Zealand symbol like Koru design on the dress. Therefore, the markup of 80% is not fair not it should be increased.
By having a underapplied overhead to the Miss NZ dress, during the year, I Do Attire might have quoted too low a price for the job. If I Do Attire increased the quoted price, allowing for a higher overhead rate, then I Do Attire might miss out on future contracts to competitors. I Do Attire might need to review overhead costs to see if these can be reduced in the future, so business can remain competitive.
Sayano Murayama
Overhead based on direct labor includes the cost of the Product Development Support Center, interest expenses, and general and administrative expenses. The Product Development Support Center failed to account for hours spent on each product, which will not only complicate the product cost calculations, but also the calculation of capitalization expenses later on. The Development Support Center will be most used during the peak (i.e. most hours) time of development for each product, and hours worked will probably be the best way to divvy up the costs of the support center. The money invested in the company is being used on developing each product right now. I figured interest would best be divvied up by hours to attribute the interest expense to the product using the most of the investment. Similar to the reasons stated before general and administrative costs are going to be associated with the most prominent product, and that is best seen through hours. (Figure A)
= Direct Labor + Direct Materials + Overhead Direct Labor = .185 x 12.76 = 2.36 Direct Materials = 6.44 Overhead: Labor Support OH = 1.11 x .185 x 12.76 = 2.62 Machine Operation OH = (8.99 + 7.61) x .310 = 5.15 Machine Setup OH = (33.76 x 4.2 x 2) / 80 = 3.54 Production Order OH = (114.27 x 2) / 80 = 2.86 Materials Handling OH = (19.42 x 4) / 80 = 0.97 Parts Admin.
In the John Deere case, they were calling a lot of things overhead that weren't truly overhead (e.g. scrap, which is probably proportional to the amount produced). We discussed with my group how the internal transfer pricing arrangement probably encouraged the managers to think this way, since it awarded contracts on the basis of direct costs but, by the books, the actual transfer price was supposed to be the full price. In summary, the John Deere case was an exercise in thinking about how not to make pricing decisions.
The presentation of the material is in dollars only. Overhead is applied to products as a percent of direct labor dollar cost. Factory profit for each year is found by subtracting direct material, direct labor, and direct overhead costs from total sales. The overhead percentage is calculated at the same time budgeting and is applied as a single overhead pool throughout each model year. The consulting company used 435% of direct labor costs in 1987 for their study; the budgeted was actually 437% (OH/DL=107,954/24,682). A similar percentage applies in the following year (109890/25294=434.5%). However in the next two years, after the outsourcing of oil pans and mufflers was enacted, the allocation of overhead in...
Regarding the markup price, the top management is not allowing to go below 33.3%. Though some of the other options to be consider like on basis of past good relations with Konig explain them the benefits of high quality regardless the price, other options to be consider for future if bid is not gained etc. Such options are tested against the production, its cost, benefits to new projects.
Lululemon’s has to produce and sell 150,000 jackets in order to cover their total expenses, fixed and variable. At this level of sales, Lululemon’s will breakeven (profit = loss).
...h the full expenses included. Challenge overseeing and incorporating over a huge supply change and developing patterns.
Alternative 2: Pursuing with the increases operational cost because of the execution of a mailing and advertising campaign which is added above as marketing expenditure. The additional $600,000 budget does make a huge difference in the outcome of the company’s net income.
Cost accounting system has two types, job order costing, and process cost system. These two cost systems are very different, almost every company uses order costing or process costing. Starbucks, is a coffee shop where citizens congregate to drink there morning coffee, study, and or socialize. Starbucks is one of the oldest and largest privately held specialty coffee retailer in the United States. (Starbucks) Their passion is to discover the flavors you love and always bring it home, delivering the look, taste and aroma of the world’s best coffee and teas. Job order costing is a very easy way in order to help Starbucks managers to know how much profit their company (Starbucks) made.
Treating overhead costs as "fixed" can cause an unfair and highly misleading distribution of overhead costs which are in fact variable.
During this project, I am going to mention the details of TOYOTA production process system which was developed more than 40 years ago by Taiichi Ohno, the president of Toyota Motor company at that time. The production system that Toyota company uses now and before is relevant to the concept of the process costing system which is currently used in all department of the company.
The contained paper has been prepared with objectives of elaborating over the three different costing methods namely, Absorption/Full Costing, Variable/Marginal Costing, and Activity Based accounting. The first segment of the report seeks to define and illustrate the costing methods based on the personal understanding of the writer gained through the class room and the academic readings. Part two of the report takes a form of short essay, written critically to evaluate the application of standard costing and variance analysis to any size of business, and concludes with a verdict that whether or not standard costing and variance analysis is applicable to each business with consideration of its costs and benefits of the system.
Project managers must take cost estimates seriously if they want to complete software projects within budget constraints. After developing a good resource requirements list, project managers and their software development teams must develop several estimates of the costs for these resources. There are several different tools and techniques available for accomplishing good cost estimation.
Activity-based costing is used as a supplement of traditional cost accounting in a company to support manager in internal decision making. It focus on assigning the indirect cost to direct costs in order to get a more accurate cost on products. Activity-based costing uses several cost pools instead of one in traditional cost accounting. The system is easy to implement and it provides many benefits, it allows the company to respond to inefficiency by reallocating resources to more profitable activity from areas that absorb too many resources. It also allows the company to respond to manufacturing overhead cost and assumes a more accurate selling price on products in order to make more profits. Company that do not have internal expertise to conduct activity-based costing analysis may think to hire one or ask company that provides this kind of services for help.
Labor costs enter into two categories: fixed costs and variable costs. Fixed costs refer to salaries of core staff or permanent staff and variable costs to hourly or casual staff. Labor costs are the highest costs in food and beverages operations. On the other hand food costs are said variable costs. Thus controlling labor costs is fundamental in increasing revenue. Also the reduction of food cost will add revenue and make business more sustainable.