Subject: Contrast between the order cost system and the procedural cost system

MBA 5040- Managerial Accounting

Task 2.1- Value 30 points

Part I- Exercise cost by orders (Value: 14 points)

The accounting records indicate certain balances in the inventory accounts for 20xx:

1/1/xx 12/31/xx

Material inventory $24,000 $13,000

Inventory of products in process

(Work in Process) -0- $21,000

Finished Goods Inventory $11,000 $26,000

Other data (applies to the period from 1/1/xx to 12/31/xx)

Prime costs were $383,000.

Materials were purchased 10 times the amount of what was in materials inventory at the beginning of the year.

Direct Labor costs represent 40% of conversion costs which were $330,000.

The company generates, on average, a 34% gross profit (Gross Margin).

Required:

1. Calculate the following items for 20xx:

to. Cost of materials used (Direct Materials Used)

b. Direct Labor Cost

c. Indirect factory costs incurred (Manufacturing Overhead)

d. Cost of Goods Manufactured

and. Unit cost (350 units are produced)

F. period sales

g. cost of goods sold

Note: You may prepare the Statement of Cost of Goods Manufactured as a basis for your answer, but it is not required.

Part II- Procedural cost (Value: 10 points)

Alcanza Corp. adds the materials at the beginning of its production process and the conversion costs are added uniformly. At the beginning of June 20xx, the inventory in process was 25% complete; at the end of the month it had 60% completion. Other important data is disclosed below:

Beginning inventory of goods in process 1,400 units

Units started during the period 3,300 units

Units completed during the period 3,900 units

Conversion costs $280,000

Direct materials used $650,000

Initial inventory costs

Materials $160,000

Conversion $125,000

Required:

1. Prepare the cost report for the month of June 20xx.

Part III- Question (Value: 6 points)

1. Compare and contrast accounting according to both methods (establish two similarities and two differences).

2. Establish in which of the cost systems it is more practical to do a cost-benefit analysis and in which a volume cost analysis applies (use the textbook and the presentation of module 2 as a basis for answering).

Note:Explain how these methods are related to cost-benefit analysis and cost-per-volume analysis.