A Case Study Work Of Lifestyle Furniture

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Introduction

Case Study Work is based on the lifestyle furniture that has two ranges of the product and the two ranges are totally different in the design. In spite the differences both have the high-quality furniture and prices are charged accordingly (Goodrich et al.  2011). Brendan Pierce, the owner of the company argued that if it is not providing the better quality of the product than the other company, then what else will be required to get charged. The reason behind this case study is that the LifeStyle Furniture Company was not having an accounting management during their existence (Hampshire 2010). So, Brendan Pierce needs an accountant who will be able to total up the revenues and expenses. So, as an accountant, the duty is to take care of all the accounting related problems that raised in Case Study Work of the company due to the fire.

Case Study Work

A. Purpose of a Product costing systems

After appointed as an accounting manager the company faced a problem where the company got affected due to the fire and most of the detailed information got affected. So, now LifeStyle Furniture Company wants to bring back all information that has been lost (Lucey 2012). So, at first there is a requirement for preparing the product cost system by the management via conducting the meeting regarding the valuation of financial accounting inventory for the decision making process.

In addition, the purpose of the product costing system is determined to examine the efficiency of the production operational management and alternatives of cost reducing (Smith  2012). Therefore, the product costing is required to get prepared for few purposes: for allocating the manufacturing cost acquired between the inventories and the cost of goods sold and providing important information in relation to the managerial requirements of decision making. Product cost is also considered importantly related to the price structure in the competitive business marketing.

B. Preparation of Schedule of cost of goods manufactured and cost of goods sold

The schedule of cost of goods manufactured and the cost of goods sold includes three elements of the product cost like: direct materials, manufacturing overheads and direct labour that summarises the ending work-in-process inventory and the finished goods inventory (Woolf et al.  2010). Some of the major items like carriage inwards, cash discounts and trade discounts are missing from the schedule of cost. This is because most of the information has been lost in fire and rest are not been given because of the negligence of the part time accountant.

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So, the over or under overhead is calculated through the differences between the manufacturing overhead costs and the work in progress.

D. Application of over-or under- overhead

The over or under applied manufacturing overhead analysis the differences between the manufacturing overhead cost and the cost that is applied to work in progress. So, the differences of the manufacturing overhead cost that is applied to work in Case Study Work progress and the manufacturing overhead cost are termed as the over-applied overhead (Ou-Yang and TS  2010). So, over or under applied manufacturing overhead is actually shown through the debit and the credit balance in the manufacturing overhead account.

The overhead application is determined through the portion of the manufacturing overhead costs to the specific manufactured product. The activities that are applied in the overhead activity are: the production units, direct labour hours to be incurred, expected direct labour dollars and the number of the machines that are used (Rosa et al.  2010). The over- applied overhead is applied when applied overhead becomes greater than actual overhead. In addition, under applied manufacturing overhead is applied when applied overhead becomes less than actual overhead

E. Evaluations of ABC and recommendations

The ABC system is the method of allocating the overhead to those of the items that are used during the calculation of the cast related activities like: cost of goods manufactured, costs of the goods sold, the purchase of the raw materials, etc (Shehab and Abdalla. 2011). The Activity-based costing helps to determine the product cost and helps to make the financial information more accurate and reliable. It helps to control the overheads that include variable and the fixed cost overhead (Zweibel  2010).  ABC system helps to provide the sufficient information for making the decisions and also considers the fair allocation of the overheads.

Besides, some the major drawbacks are mentioned in this Case Study Work it has the difficulties in identifying the overall activities that causes an effect on the cost (Shehab and Abdalla. 2011). It is not applicable to the small manufacturing units. There is a difficulty for calculating the cost on the basis of the activities.

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Conclusion

The purpose of this Case Study Work topic is to show the financial management position of the company as an accountant with the required financial information that are required to be calculated during the operations of the company. For that purpose different calculations are required to be calculated on the basis of the financial information that is shown in the financial management position of the LifeStyle Furniture.