Project Management Carlton Specialty PLC

Questions: 1. Prepare a combined schedule of cost of good manufactured and cost of soldstatement for the month of July 2016. Show computations pertaining to the missing values for raw materials and WIP control accounts.2. Prepare an income statement for the month of July 2016.3.Discuss the main differences between job costing and process costing. Hint: Youare required to use proper referencing.4. Are monthly production reports an example of periodic or perpetual inventorysystems? Explain. Answers: Introduction The organizations operating in the modern economic structure, use complex functions to evaluate their manufacturing and cost of goods sold. The organizations require proper evaluation of the production cost in order to take pricing decisions about their commodity. The pricing decisions are necessary to determine the organizations revenue for an accounting year. Thus its is necessary to maintain their production cost in detail This study evaluates the production cost and the cost of goods sold of Carlton Specialty PLC, manufacturer of custom-based furniture. The study reveals that the accounting information about their production cost is lost due to an accidental fire and thus it is necessary to create a revised cost of manufacture and also the cast of sales. The study also assesses the difference between job and process costing and whether monthly production report is an example of perpetual or periodic inventory system. 1.In the books of Carlton Speciality PLC Schedule of Cost of Goods Manufactured Goods Sold for the month of July'2016 Particulars Amount Amount Direct Material Consumed : Raw Material Purchase 425000 Add : Opening Balance of Raw Material 3091000 3516000 Less: Closing Balance of Raw Material 850000 2666000 Direct Labor Costs : 864000 PRIME COST 3530000 Manufacturing Overhead 1350000 FACTORY COST 4880000 Opening Balance of Work-in-Progress 240000 Less: Closing Balance of Work-in-Progress 240000 0 COSTS OF GOODS MANUFACTURED 4880000 Opening Balance of Finished Goods 320000 Less: Closing Balance of Finished Goods 1200000 -880000 COST OF GOODS SOLD 4000000 Add: Profit Margin @50% 2000000 SELLING PRICES 6000000 Workings: Dr. Accounts Payable A/c. Cr. Date Particulars Amount Date Particulars Amount 30-Jun To, Bank A/c. 430000 1st July By, Balance B/f 70000 By, Purchase of Raw Material A/c. 425000 30th June By, Balance C/f 65000 495000 495000 Dr. Finished Goods A/c. Cr. Date Particulars Amount Date Particulars Amount 1st July To, Balance B/f 320000 By, Cost of Goods Sold A/c. 1786000 To, Work-in-Progress A/c. 2666000 30th June By, Balance C/f 1200000 2986000 2986000 Dr. Work-in-Progress A/c. Cr. Date Particulars Amount Date Particulars Amount 1st July To, Balance B/f 240000 By, Finished Goods A/c. 2666000 To, Raw Materials A/c. 2666000 30-Apr By, Balance C/f 240000 2906000 2906000 Dr. Raw Material A/c. Cr. Date Particulars Amount Date Particulars Amount 1st July To, Balance b/f 3091000 30th June By, Work-in-Progress A/c. 2666000 To, Accounts Payable A/c. 425000 30th June By, Balance c/f 850000 3516000 3516000 Dr. Cost of Goods Sold A/c. Cr. Date Particulars Amount Date Particulars Amount 30th June To Finished Goods A/c. 1786000 To Direct Labor Cost A/c. 864000 To, Manufacturing Overhead A/c. 1350000 30th June By, Income Statement 4000000 4000000 4000000 Dr. Manufacturing Overhead A/c. Cr. Date Particulars Amount Date Particulars Amount 30th June To Bank A/c. 1350000 By, Cost of Goods Sold A/c. 1350000 1350000 1350000 2. In the books of Carlton Speciality PLC Income Statement for the month of July'2016 Particulars Amount Amount Sales Revenue 6000000 Cost of Goods Sold -4000000 Gross Profit 2000000 Selling Administrative Cost -400000 Net Income before Interest Tax 1600000 3. The difference between Process Costing and Job Costing are as follows: Job costing involves the evaluation of cost of special orders, and the work contracts, which are done according to the instructions of the customers. Process costing on the other hand is a technique in, which costs are charged to number of processes and operations. Job costing is a customized mode of manufacturing function as it involves the use of individual units. Process costing on the other hand is a patterned mode of production function, which involves a process or a guideline for its operations. The computation of job costing is done by evaluating each job separately while process costing involves determination of all the costs of the processes and then the manufacture units are distributed accordingly (Braun 2013). The cost center involves a job in job costing and a process or mechanism in process costing. In job costing no transfer of costs are done whereas costs allotted to a product is transferred with the transfer of the product from one process to the other. In job costing every work is different from each other an thus are heterogeneous. Process costing involves a continuous production process and thus the products are homogeneous and lose their identity (Popesko 2013). The cost is determined after the completion of the job in job costing whereas the cost is evaluated at the closing of an accounting period in process costing. Job costing is ideal for firms, which produces commodities as per the needs of the clients whereas process costing is suitable for any firm where the production process is done in a bulk. The cost reduction process is less in job costing but process costing creates a higher scope for cost reduction. 4. The monthly production report is an example of perpetual inventory system, as perpetual system requires daily up gradation of the inventory records. Thus perpetual system holds an upper hand as it provides an updated inventory data and requires less amount of physical inventory counts. But such system can be ineffective when some transactions are not recorded or any case of theft. Thus, a periodic comparison with the book balance to the real hold on the total quantity is necessary to adjust the book balance as required. Perpetual inventory system is thus a better method for tracing the inventory as it provides exact results of the continuous production process (Warren, Reeve and Duchac 2013). Periodic inventory system on the other hand only updates the balance in the ledgers when a physical inventory count is made. This process is very tedious and time consuming and thus it is preferably not used by companies. Thus monthly production report is an example of perpetual system as it not only takes into account the up gradation of records without only focusing on the physical change. Conclusion The above study determines the schedule of cost of goods manufactured and the cost of sales of Carlton Specialty PLC and finds out the lost records of the organization. The organization also focuses on the process of job and process costing. The study thus gives out the total production cost of the organization and thus helping them to determine the price of the product. Reference List Braun, K.W., 2013. Custom fabric ventures: An instructional resource in job costing for the introductory managerial accounting course.Journal of Accounting Education,31(4), pp.400-429. Fisher, J.G. and Krumwiede, K., 2012. Product costing systems: Finding the right approach.Journal of Corporate Accounting Finance,23(3), pp.43-51. Popesko, B., 2013. Costing methods utilization in Czech enterprises. Warren, C.S., Reeve, J.M. and Duchac, J., 2013.Financial managerial accounting. Cengage Learning.