Case 8.1: Laramie Wire Manufacturing depreciation and maintenance on the machinery. Laramie uses a hybrid product costing system (ie, a system that combines characteristics of both job-order and process costing systems) to accommodate both the continuous and homogeneous nature of the manufacturing process and the fact that production runs are performed in separately identifiable batches. In accordance with the relatively homogenous nature of Laramie's products, overhead is allocated from a single cost pool based on a combination of machine and direct labor hours. As the insulated copper wire product is completed, it is rolled onto large spools of various sizes, usually in lengths of about 500,000 linear feet. These spools of finished goods inventory are stored next to the raw materials inventory near the facility's eight loading and unloading docks. In many cases, the inventory is produced in response to specific customer orders received. The spools are tagged for shipment to customers according to date requested. Inventory that has been produced to provide a "cushion" for rush orders is stored toward the far end of the finished goods storage area, away from the shipping area. The inventory and production areas are well organized and seem to flow smoothly. Machines appear to be well maintained. A cursory visual examination of inventories reveals no problems. Two spools in the finished goods area were tagged as being of a type of residential wiring recently banned by federal safety guidelines. These spools are clearly marked, and the inventories supervisor indicated they are to be destroyed within the next week. Procedures and records for tracking materials upon arrival, through the production process, and into finished goods and shipping, appear to be well designed REQUIRED [1Perform analytical procedures to help you identify relatively risky areas that indicate the need for further attention during the audit, if any. 2018 $ 8,450,000 $6,242,500 $1,654,500 2017 $ 8,150,000 $6,080,000 $ 1,175,500 $ 2,625,000 $1,650,000 $ 224,500 $ 182,000 Sales Cost of Sales Finished Goods Inventory (Approx. 250 million ft.) Copper Rod Inventory (Approx. 5.5 million lbs.) Plastics Inventory (Approx. 1 million lbs.) Accounts Payable (for Inv. purchases) Days Purchases in A/P Days Sales in Receivables Market Price of Insulated Wire (per foot) Market Price of Copper Rod (per lb.) Market Price of Plastics (per lb.) $ 450,000 43.6 days 56.3 days $ 0.008 $ 0.480 $ 0.120 $ 425,000 44.2 days 48.4 days $ 0.009 $ 0.480 $ 0.190 Case 8.1: Laramie Wire Manufacturing depreciation and maintenance on the machinery. Laramie uses a hybrid product costing system (ie, a system that combines characteristics of both job-order and process costing systems) to accommodate both the continuous and homogeneous nature of the manufacturing process and the fact that production runs are performed in separately identifiable batches. In accordance with the relatively homogenous nature of Laramie's products, overhead is allocated from a single cost pool based on a combination of machine and direct labor hours. As the insulated copper wire product is completed, it is rolled onto large spools of various sizes, usually in lengths of about 500,000 linear feet. These spools of finished goods inventory are stored next to the raw materials inventory near the facility's eight loading and unloading docks. In many cases, the inventory is produced in response to specific customer orders received. The spools are tagged for shipment to customers according to date requested. Inventory that has been produced to provide a "cushion" for rush orders is stored toward the far end of the finished goods storage area, away from the shipping area. The inventory and production areas are well organized and seem to flow smoothly. Machines appear to be well maintained. A cursory visual examination of inventories reveals no problems. Two spools in the finished goods area were tagged as being of a type of residential wiring recently banned by federal safety guidelines. These spools are clearly marked, and the inventories supervisor indicated they are to be destroyed within the next week. Procedures and records for tracking materials upon arrival, through the production process, and into finished goods and shipping, appear to be well designed REQUIRED [1Perform analytical procedures to help you identify relatively risky areas that indicate the need for further attention during the audit, if any. 2018 $ 8,450,000 $6,242,500 $1,654,500 2017 $ 8,150,000 $6,080,000 $ 1,175,500 $ 2,625,000 $1,650,000 $ 224,500 $ 182,000 Sales Cost of Sales Finished Goods Inventory (Approx. 250 million ft.) Copper Rod Inventory (Approx. 5.5 million lbs.) Plastics Inventory (Approx. 1 million lbs.) Accounts Payable (for Inv. purchases) Days Purchases in A/P Days Sales in Receivables Market Price of Insulated Wire (per foot) Market Price of Copper Rod (per lb.) Market Price of Plastics (per lb.) $ 450,000 43.6 days 56.3 days $ 0.008 $ 0.480 $ 0.120 $ 425,000 44.2 days 48.4 days $ 0.009 $ 0.480 $ 0.190