Overview Cost accounting is used for two main purposes. The first purpose is to determine the actual costs of products, projects, processes, or services so an organization can report correct and accurate information on their financial statements. The second purpose is to aid the management team in making decisions and guiding the planning and control functions of the organization. Cost accounting provides an analysis of cost behavior, cost-volume-profit relationships, budgeting, resource costing, and activity- based costing. The roots of cost accounting are in the manufacturing business, but cost-accounting concepts are also used in service industries. This assessment focuses on the SRS Educational Supply Company case study. SRS is a company that provides materials and supplies to educational institutions. The SRS business model is to be a one-stop provider of educational supply needs. For example, some of their product lines include workbooks, classroom visual aids, instructor support materials, art supplies, lab supplies, and administrative office supplies. While SRS serves all levels of educational institutions, the majority of their customers are K- 12 schools. Sales can vary quite a bit from month to month, as K-12 educational institutions have seasonal ordering patterns. Thus, budgeting is vital for planning and cash flow purposes. SRS has a June 30th fiscal year end. The final project is divided into two parts. In Final Project I, you will consider job order costing and process costing for the SRS Educational Press division of the company. You will review the information provided and prepare journal entries for the inventories. Then, you will prepare a summary of the performance for the Educational Press division. The final product will be submitted in Module Three. In this assignment, you will demonstrate your mastery of the following course outcomes: ACC-311-01: Control the cost structure of an organization to achieve a target operating income ACC-311-03: Prepare cost accounting reports to internally communicate information to managerial decision makers Prompt Assume you are the new cost accountant at SRS. As part of your new position, you have been asked to perform a few tasks for the company's leadership team. Refer to the case study for details on this part of the final project. Specifically, you must address the following critical elements listed below. Most of the critical elements align with a particular course outcome (shown in brackets). 1. Cost Structures A. Prepare an overview diagram of the job-costing system at the SRS Educational Press. [ACC-311-01] B. In a spreadsheet, prepare journal entries to summarize the 2017 transactions. For your final entry, dispose of the year-end under- or overallocated manufacturing overhead as a write-off to the Cost of Goods Sold account. Number your entries. Explanations for each entry may be omitted. [ACC-311-01] C. In a spreadsheet, show posted T-accounts for all inventories and the cost of goods sold, the manufacturing overhead control, and the manufacturing overhead allocated. [ACC-311-01] D. How was the SRS Educational Press performance in 2017? Should the company continue to have in-house press production? Did SRS accurately budget for manufacturing overhead costs? Support your answers with relevant data. Also, briefly explain how the firm can dispose of under- or overallocated overhead costs. [ACC-311-03] E. Name at least two other products that you are familiar with that would benefit from job order costing, and briefly explain how they would benefit. [ACC- 311-01] I would suggest doing the journal entries first and then carrying over the numbers into the t- accounts. The only accounts that you will need t-accounts for are the following: Materials Control Work-in-process-Control Finished Goods Cost of Goods Sold Manufacturing Overhead Control Manufacturing Overhead Allocated Summative Case Study: SRS Educational Supply Company Part 1-Job Order Costing/Process Costing SRS Educational Supply Company provides educational materials and supplies to educational institutions. The company provides educational supply needs that includes workbooks, classroom visual aids, instructor support materials, art supplies, lab supplies, and administrative office supplies. Since SRS Educational Supply Company consistently produces the same service to its customers, the company uses job order costing. The company's processing units are assigned costs. For example, the company will determine all of the costs associated with the sales/marketing in a certain period and divide the costs by the number of customers that the company currently has. The cost per customer then becomes a part of the inputs and its used to determine the cost of sales/marketing and the cost of each customer. Service industries often do not match directly the normal costing systems, but the same concepts can still be used to determine the costs per customer. Dec. 1, 2017 Beg. Balance- Transferred in from WIP Finished Goods Control $500 $4,020. $4,120 --S (Completed) Cost of goods soldo Dec. 31, 2017 Ending. Balance =-$500+ $4,120 =-$4,620 =-$4,620-$4,020 =-$600 -S $6000 $- Ending Balance Cost of goods sold (Completed) Dec. 1, 2017 Beg. Balance Cost of goods sold this period --Sa --S $4,020| S- S. -X A -X --S Ending. Balance- SSS S -X --- a S- Ending Balance ?-?-2017-Balance MOH costs Indirect materials used Indirect labor cost Ending. Balance Manufacturing Overhead (OH) Control(Completed) --$ -$a S. SS S. --0 - $1000 S- $900 $ X- -X S. Ending Balance ja A The SRS Educational Press is wholly owned by the Company. It performs the bulk of its work for the print materials that are sold to the customers. The press also publishes and maintains a stock of books for general sale. The press uses normal costing to cost each job. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost pool (manufacturing overhead, allocated on the basis of direct manufacturing labor costs). The following data (in thousands) pertain to 2017: Direct materials and supplies purchased on credit: $800 Direct materials used: $710 Indirect materials issued to various production departments: $100 Direct manufacturing labor: $1,300 Indirect manufacturing labor incurred by various production departments: $900 Depreciation on building and manufacturing equipment: $400 Miscellaneous manufacturing overhead incurred by various production departments: $550 (Ordinarily, this would be detailed as repairs, photocopying, utilities, etc.) Manufacturing overhead allocated at 160% of direct manufacturing labor costs: ? Cost of goods manufactured: $4,120 Revenues: $8,000 Cost of goods sold (before adjustment for under- or overallocated manufacturing overhead): $4,020 Inventories, December 31, 2016 (not 2017): Materials control: $100 Work-in-process control: $60 o Finished goods control: $500 Submission Requirements for Final Project I: As the accountant, the company has asked you to perform the following tasks: 1. Prepare an overview diagram of the job-costing system at the SRS Educational Press. 2. Prepare journal entries to summarize the 2017 transactions. As your final entry, dispose of the year-end under- or overallocated manufacturing overhead as a write-off to cost of goods sold. Number your entries. Explanations for each entry may be omitted. 3. Show posted T-accounts for all inventories, Cost of Goods Sold, Manufacturing Overhead Control, and Manufacturing Overhead Allocated. 4. How did the SRS Educational Press perform in 2017? Should the company continue to have in-house press production? You will submit your answers/explanations for Final Project I in a memo-style format to the company's leadership team. Use Microsoft Word and Excel. (Completed) Date 2017 Account Titles & Explanations Materials control (A+) Accounts payable control (L+) Direct materials purchased on account (Completed) Adjusting Journal. Entries Debit Credit $800x $800x Adjusting Journal Entries Date Account Titles & Explanations Debit Credit 2017 Work-in-process (for direct $710 materials (A+) Materials control (A-) $710x Used direct materials for production.to 10 In the second transaction, Materials control will be used in this transaction rather than "Direct. materials used" underneath the t-accounts for Work-in-process-and-Materials control. (Completed) Adjusting X Journal. Entries Date Account Titles & Explanations Debit Credit 2017 Manufacturing overhead control $100 (E+)x 0 Materials control (A-) $100 Used indirect materials for production.to (Completed) Adjusting Journal. X Entries Date Account Titles & Explanations Debit Credit 2017 Work-in-process-control-(A+) X $1,300x Manufacturing overhead control $900 X (E+) Wages payable (L+) Incurrence-and-allocation of 8 $2,200 manufacturing wages and direct and indirect labor cost.to $1,300+ $900 =-$2,200 *2,200 is Wages payable. 22, 2017 Beg. Balance Direct materials purchase- Ending Balance =-$100+ $800 =-$900 =-$710+ $100 =-$810 Materials Control (Completed) $100 $710- $8000 $100 -Direct materials used/issued Indirect materials used/issued $900 S =-$900-$810 =-$90.00 I must use "Materials Control" in place of "Materials inventory." Ending Balance Dec 1, 2017 Beg. Balance- -Work-in-process Control(Completed) S60 $4,120 Finished goods, or completed and transferred to finished goods. Direct labor used --$-1,300x S. -- Direct materials used- -S-710x S.. --0 Allocation of Manu. Overhead cost $2,080x a Ending Balance $30- Dec. 31, 2017 Ending Balance a 1 . 160 100 Manufacturing overhead allocated at 160% of direct manufacturing labor costs: ? Cost of goods manufactured: $4,120 =-1.6 =-1.6--$1,300 (Direct labor cost/Direct labor-used) =-$2,080 =-$60+$1,300+ $710+ $2,080 =-$4,150 =-$4,150--$4,120 =-$30