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    Cost Flows in Manufacturing

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    The project will demonstrate your comprehension of managerial accounting and your
    ability to effectively communicate in writing.

    The purpose of this Project is to give you hands-on experience in a manufacturing
    process - for example baking a cake. All the key elements of direct materials, labor
    and applied manufacturing overhead are part of baking cakes, even if we do not think
    of this process as manufacturing. The basic flow of costs through a manufacturing
    process is critical to understanding and using managerial accounting information,
    but it is a process that seems foreign to many students. Baking cakes is a much more
    understandable process, and can help you internalize this basic accounting concept
    along with internalizing some cake!

    Content Goals
    *Identify the cost flows in manufacturing (See pg 102, 116, 152 and 153)

    *Analyze and report process costs

    Process Goals
    *Use prior knowledge/experience to master new concepts

    Basic Requirements
    The Project does not have a minimum or maximum page requirement; however, all
    outputs (see below) MUST be completed entirely. The paper MUST be typed using, 8 ½
    x 11 paper and doubled space with 1 margins on all four sides of each page. Indent
    5 spaces to indicate a new paragraph. Your paper MUST have a title page. The maximum
    font size is 12. Number every page, beginning with page 2, at the bottom right of
    the page.

    Summary Requirements
    For starters, you will need to find your favorite cake or cookie recipe. Using this
    recipe, you will determine the basic stages and requirements for cake or cookie
    manufacturing. You will use a flow chart to illustrate the sequential or parallel
    cake/cookie manufacturing process. You will also report on the flow of costs in the
    manufacturing process by completing the Schedule of Cost of Goods Sold and the
    Schedule of Cost of Goods Manufactured. To complete this activity may mean taking a
    trip to the local grocery store to gather reasonable costs.
    You have $10,000 budget per month. You are required to spend as much as possible.
    The cost of rent is $1,000 per month. Please make-up your own amounts for utilities
    and other business expenses. Make certain that you include all reasonable costs
    that would be likely incurred in this manufacturing process.

    Activity Outcome
    When you have completed the manufacturing activity, you should have a better
    comprehension of the three key components of manufacturing costs (direct material,
    direct labor, applied manufacturing overhead) and how these costs flow through a
    manufacturing process.

    Activity Outputs
    · Provide an Overview of the Business
    Give a description of your company, location, products, and staff. Discuss the
    financial data that will be presented in the Schedules, the Income Statement, and
    the flow charts. Discuss the time period (monthly, quarterly, annually) for which
    these data are being reported.

    · Provide the Manufacturing Process Flow
    Prepare a flow chart illustrating the various stages of your manufacturing process.
    It would be helpful to report which costs are added at each stage of the process.

    · Provide the Recipe
    The recipe should report the number of units it is expected to yield. The
    ingredients and units of measure reported in the recipe should tie directly to the
    ingredients and units of measures reported on the Raw Materials Schedule. For
    example, if the recipe states to yield 100 cookies, 2 cups of milk are required and
    the Raw Materials Schedule states that it will produce 1000 cookies, then I expect
    to see 20 cups of milk reported on the Raw Materials Schedule. That is, 2 cups of
    milk to produce 100 cookies then 20 cups of milk to produce 1000 cookies.

    · Prepare a Raw Materials Schedule
    Quantity (for eg, to produce 1000units)DescriptionUnit CostTotal Cost
    20 Milk$1.00$20.00
    The quantity should tie to the recipe. Thus, for example, to yield 100 units, the
    recipe requires 2 cups of milk and thus requires 20 cups of milk to produce 1000
    units.

    · Prepare a Direct Labor Schedule
    QuantityDescriptionUnit CostTotal Cost
    HoursPosition
    This is estimated direct labor costs and hours for a period (month, quarter, year).

    · Prepare an Overhead Schedule
    These would be estimated manufacturing overhead costs for a period (month, quarter,
    year).

    · Calculate the Manufacturing Overhead Rate

    · Prepare the Schedule of Cost of Goods Manufactured
    I advise that you use Template P3-19.

    Problem 03-19

    Manufacturing overhead cost
    Direct labor cost
    Overhead rate

    Actual manufacturing overhead costs:
    Insurance, factory
    Depreciation of equipment
    Indirect labor
    Property taxes
    Maintenance
    Rent, building
    Total actual costs
    Applied manufacturing overhead costs
    Underapplied overhead

    PACIFIC MANUFACTURING COMPANY
    Schedule of Cost of Goods Manufactured

    Direct materials:
    Raw materials inventory, beginning
    Add purchases of raw materials
    Total raw materials available
    Deduct raw materials inventory, ending
    Raw materials used in production
    Direct labor
    Manufacturing overhead applied to work in process
    Total manufacturing costs
    Add: Work in process, beginning

    Deduct: Work in process, ending
    Cost of goods manufactured

    Cost of goods sold:
    Finished goods inventory, beginning
    Add: Cost of goods manufactured
    Goods available for sale
    Deduct: Finished goods inventory, ending
    Cost of goods sold

    Direct materials
    Direct labor
    Overhead applied
    Cost to manufacture
    Price to customer

    The amount of overhead cost in Work in Process would be:
    Direct labor cost
    Overhead rate
    Work in process overhead cost

    The amount of direct materials cost in Work in Process would be:
    Total ending work in process
    Deduct:
    Direct labor
    Manufacturing overhead
    Direct materials

    The completed schedule of costs in Work in Process would be:
    Direct materials
    Direct labor
    Manufacturing overhead
    Work in process inventory

    © BrainMass Inc. brainmass.com October 9, 2019, 5:48 pm ad1c9bdddf
    https://brainmass.com/business/financial-accounting-bookkeeping/cost-flows-manufacturing-managerial-accounting-68335

    Solution Preview

    he project will demonstrate your comprehension of managerial accounting and your
    ability to effectively communicate in writing.

    The purpose of this Project is to give you hands-on experience in a manufacturing
    process - for example baking a cake. All the key elements of direct materials, labor
    and applied manufacturing overhead are part of baking cakes, even if we do not think
    of this process as manufacturing. The basic flow of costs through a manufacturing
    process is critical to understanding and using managerial accounting information,
    but it is a process that seems foreign to many students. Baking cakes is a much more
    understandable process, and can help you internalize this basic accounting concept
    along with internalizing some cake!

    Content Goals
    *Identify the cost flows in manufacturing (See pg 102, 116, 152 and 153)

    *Analyze and report process costs

    Process Goals
    *Use prior knowledge/experience to master new concepts

    Basic Requirements
    The Project does not have a minimum or maximum page requirement; however, all
    outputs (see below) MUST be completed entirely. The paper MUST be typed using, 8 ½
    x 11 paper and doubled space with 1 margins on all four sides of each page. Indent
    5 spaces to indicate a new paragraph. Your paper MUST have a title page. The maximum
    font size is 12. Number every page, beginning with page 2, at the bottom right of
    the page.

    Summary Requirements
    For starters, you will need to find your favorite cake or cookie recipe. Using this
    recipe, you will determine the basic stages and ...

    Solution Summary

    This identify the cost flows in manufacturing

    $2.19