You are the managerial accountant for ABC Company. ABC Company is a manufacturer of heating, ventilation, and air conditioning (HVAC) units. They bill their customers for a lump-sum price which includes installation charges.
ABC Company was selected for a routine sales tax audit. The auditor is assessing tax on the lump-sum charge that was billed to the customer. The owners of ABC Company lost all their books and records and is asking you for any help to provide documents to determine the cost of the manufactured HVAC unit. The auditor is assessing tax on the total charge which includes installation charges (which are not part of the product cost). You need to help your manager show the auditor the manufacturing cost to make the HVAC unit to allow a correct assessment of the selling price of the HVAC unit.
Explain how you would do this in essay format (half page minimum, 12 font size).
Some possible keywords to mention in the explanation:
Predetermined overhead rate Employee time ticket
Manufacture Overhead Purchase invoices
Direct Labor Material requisition form
Direct Materials Job cost sheet
Job costing system Reasonable Markup on Cost
Since the books is lost we can prepare a cost sheet in order to identify the cost of the product. For the purpose of cost sheet we need the material cost, labor cost, overhead and other direct and indirect cost. The company is following absorption costing to as job costing system. The direct material cost of the company can be checked from the Purchase order which is generated post material requisition form or we can also check the purchase invoice if the same is available. Now for direct labor cost we need to know the labor rate and the labor hour, labor rate can be taken from the record and labor time is available in the employee time ticket. Post that we need to identify the pre determined Overhead rate for the company which we will charge as the manufacturing OH in order to identify the true cost of the product. Once we identify the cost we will add reasonable markup on the cost to identify the sale price of the product. By this way we can identify the cost of the product as well as the sale price of the product. In case of any indirect cost then the same shall be added first before adding any markup
I have solved the question in case of any doubt do give a comment and if you are satisfied with the answer then the do give a thumbs up.
You are the managerial accountant for ABC Company. ABC Company is a manufacturer of heating, ventilation, and air conditioning (HVAC) units. They bill their customers for a lump-sum price which includ...
Bordner Company manufactures HVAC (heating, ventilation, and air conditioning) systems for commercial buildings. For each new design, Bordner faces a 80 percent learning rate. On average, the first unit of a new design takes 600 hours. Direct labor is paid $50 per hour. Required: 1. Complete the table below showing results by row for total production of: one unit, two units, four units, eight units, and sixteen units. (Round hour answers to two significant digits.) (Round Cumulative Total Time answers...
Please read the article and answer about questions. You and the Law Business and law are inseparable. For B-Money, the two predictably merged when he was negotiat- ing a deal for his tracks. At other times, the merger is unpredictable, like when your business faces an unexpected auto accident, product recall, or government regulation change. In either type of situation, when business owners know the law, they can better protect themselves and sometimes even avoid the problems completely. This chapter...