10 Sep Complete a five-part assessment using the Assessment 1 Template.

Complete a five-part assessment using the Assessment 1 Template. Prepare calculations, enter them into the template, and make decisions using statements for cost of goods manufactured (COGM), cost of goods sold (COGS), and cost-volume-profit analysis.

Introduction

Accounting information systems in large corporations consist of two major subsystems: a financial accounting system and a cost accounting system. One of the main distinctions between the two systems is the target audience for the information. Financial accounting information is primarily for external users of financial information, including investors, creditors, and government agencies.

Cost accounting information is used internally by managers for planning and controlling costs, continuous improvements, and decision making.

Managers must understand the relationship among revenues, costs, volume, and profit. It is the cost accounting department that supplies the data and analysis that support these managers. By understanding the types of decisions managers make and how they think about the issues of volume, pricing, and cost incursion, cost accountants can lessen managers’ concerns about the effects of their decisions on profits.

Before beginning this assessment, take time to review the following topics:

• Cost of goods manufactured.
• Cost of goods sold.
• Cost-volume-profit analysis.

Complete a five-part assessment in a supplied Excel template in which you prepare and make decisions based on statements for cost of goods manufactured (COGM), cost of goods sold (COGS), and cost-volume-profit analysis.

Preparation

Use the Assessment 1 Template [XLSX] to complete the following five parts. Each part is a different tab in the template.

• Part 1: In the template, review the T-Rex Company. Answer all three questions. Show all calculations and explain briefly.
• Part 2: In the template, review the accounting records for Joplin Products. Compute the different costs per unit. Show all calculations.
• Part 3: In the template, review the accounting records for Idaho Tool & Die. Prepare an income statement with a supporting cost of goods sold statement. Show all calculations.
• Part 4: In the template, review the scenario about Toronto Partners. Compute the volume of units and volume of sales outlined. Explain how a price increase would be required to increase profit. Show all calculations.
• Part 5: In the template, review the sales revenue and costs for Chase Corporation. Prepare a schedule computing Chase’s estimated operating profit from options A, B, and C for closing a plant. Show all calculations.

Submit the completed template for Assessment 1.

Instructions

Assessment 1 Part 1: Cost Data for Managerial Purposes

In the template, review the T-Rex Company scenario and production costs and compute the requested unit costs. Show all calculations.

Part 1 Scenario

T-Rex Company makes a variety of products. It is organized in two divisions, East and West. The managers for each division are paid, in part, based on the financial performance of their divisions. The West division normally sells to outside customers but occasionally sells to the East division. When it does, corporate policy states that the price must be cost plus 15 percent to ensure a fair return to the selling division. West received an order from East for 600 units. West’s planned output for the year had been 2,640 units before East’s order. West’s capacity is 3,300 units per year. The costs for producing those 2,640 units follow:

T-Rex Company Production CostsProduction Costs for 2,640 UnitsTotalPer Unit

Materials

$528,000

$200

Direct Labor

$253,440

$96

Other Costs Varying With Output

 $168,960

$64

Fixed Costs (Do Not Vary With Output)

$2,217,600

$840

Total Costs

$3,168,000

$1,200

Complete the following:

1. If you are the manager of the West division, what unit cost would you ask the East division to pay? Show calculations.