Craft Werkz is a manufacturer of customized print products such as customized photo book and poster prints. About a year ago, the company begun to manufacture customized playing cards. Craft Werkz purchases card stock and printing supplies (i.e., its raw materials) from their suppliers and produces customized playing cards based on their customers request. It is the companys policy to only purchase from suppliers that are on the authorized suppliers list. Craft Werkzs management has recently discovered that its job costing system fails to allocate manufacturing overhead when calculating the cost of its customized playing cards. Craft Werkz sells all customized playing cards at cost plus a 30% mark-up.

Q1

Would the failure to allocate manufacturing overhead be considered a random or systematic error in relation to production (conversion) data? Explain why.

Q2

Identify and explain how this data problem would affect two other transaction cycles (not production/conversion).

Transaction Cycle 1.

Explanation

Transaction Cycle 2.

Explanation

Q3

Identify the impact(s) this problem would have on Craft Werkzs financial statement accounts.

Q4

After discovering the data issue, Craft Werkzs management wants to implement either computerized or manual controls to ensure that manufacturing overhead is consistently applied to products going forward. What type of control computerized or manual would you recommend?

Q5

Why is it important that supplies should only be purchased from a list of authorised suppliers?