Lambeth Custom Cabinets Agenda 1. In Inttrodu roduce ce Lam Lambeth beth and and th their accounting system 2. Deve Develo lop p Bal Balan ance ce Shee Sheett and and In Inco come me Statements for September 3. Additional Issues •
Mrs. Carter’s offer Overhead allocation
4. Summary of Is Issues
Beginning Balances Beg Bal
Raw Materials 2150
Beg Bal
Supplies 620
Beg Bal
Other Assets 16890
Beg Bal
WIP Inventory 5650
DM DL Ohd Beg Bal
A3 750 1100 550 2400
DM DL Ohd Beg Bal
A4 900 650 325 1875
DM DL Ohd Beg Bal
A5 325 700 350 1375
Owner's Equity Beg Bal
25310
Beginning Balance Sheet
Assets: Inventory Raw Material Work in Progress Supplies All Other Total Assets
September 1 $ 2,150 5,650 620 16,890 $25,310
Liabilities: Total Liability
$0
Owner’s Equity: Total Equity
$25,310
Mrs. Carter’s Offer •
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Would you have taken the order from Mrs. Carter for $1,500? Why or why not?
Will the business be better or worse off if it takes the order at $1,500?
Contribution Analysis: •
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How could such a sale have “saved” Walworth Kitchen Cabinets? Contribution analysis:
Further analysis…. •
If contribution analysis is useful in this circumstance, does that mean we can conveniently ignore the allocated costs as not a viable part of a job’s cost? •
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What types of costs are being allocated? Why are they being allocated? How are they being allocated? Does the business need to cover its fixed costs?
Lambeth: Summary of Issues •
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What is job-order costing and for what sorts of settings is it suitable? What is the flow of job costs through a company’s accounting records and financial statements? Why is contribution analysis important? What are issues associated with overhead allocation?
