Question - Target Company is a manufacture company that makes shoes. Once Target Company designs the shoe, reviews the design and finalized it, the fabric is cut and shaped to the pre-designed specifications required for the Shoes. Further, another machine thins the edges so various pieces are easier to sew together.
Required:
1. Discuss several production methods and the different accounting systems each requires that Target Company may use.
2. Discuss the cost accumulation process for a Target Company. Is it different for a service organization?
3. Explain the reasons product cost information is important for Target Company managers.
4. How does the Work-in-Process account both describe the transformation of inputs into outputs in Target Company and how Target Company account for the costs incurred in the process?
5. The accounting for Target Company must be familiar with the calculations of total manufacturing costs and cost of goods manufactured. Describe the three categories of manufacturing costs. What is the difference between total manufacturing costs and cost of goods manufactured?
6. Target Co. had the following beginning and ending inventory balances for the year ended December 31, 2014:
January 1, 2014 December 31, 2014
Materials $19,500 $ 8,100
Work in Process $24,000 $13,500
Finished Goods $22,500 $14,500
In addition, direct labor costs of $31,000 were incurred, overhead applied $48,000, materials purchased were $25,500 and selling and administrative costs were $22,000. Target Co. sold 25,000 units of product during the year at a sales price of $5.00 per unit.
Calculate the amount of Cost of Goods Manufactured for the year.