Accounting

DISCUSSION

1. What are some of the variable and fixed costs that are impacted by hydroponic farming as compared to traditional farming. Talk about both variable and fixed costs with traditional farming versus hydroponic farming.

2. What suggestions do you have for managing variable and fixed costs in hydroponic farming?

3. Share an example of a resource (article or video) that either supports your answers to the two questions above

ASSIGNMENT 1 1. When you manufacture something, '3' costs are involved: Direct Materials, Direct Labor and Manufacturing Overhead. Figuring out the materials and labor is the easy part. Overhead can get 'tricky'. Some examples of overhead in a factory setting: Depreciation on the machines and building, property taxes, insurance, security, utilities, etc. Here's where it gets a bit more confusing. Something called Indirect Materials and Indirect Labor are also included in the Manufacturing Overhead. A couple of examples: Indirect Materials: Lubricants; Indirect Labor: Supervision.

1. REQUIRED: List 3 other types of Indirect Materials and Indirect Labor that will become part of Manufacturing Overhead.

2. A merchandiser, like Walmart-WMT-has but '1' Inventory: they purchase most of their goods from China, add the freight, and that becomes their Cost of Goods Available for Sale or Purchased. A manufacturer has '3' inventories, which you were introduced to earlier: Raw Materials, WIP-Work in Process, and Finished Goods-FG. To compute COGS-Cost of Goods Sold for a merchandiser, you add your Beginning Inventory to Cost of Goods Purchased minus your Ending Inventory. Easy enough, I hope!

For a manufacturer, you start with your Beginning Finished Goods, add COGM-Cost of Goods Manufactured (that includes your Total Manufacturing Costs: Direct Materials,

Direct Labor and Manufacturing Overhead) and subtract your Ending Finished Goods to arrive at COGS-Cost of Goods Sold-for a manufacturer.

Net Sales minus COGS = Gross Profit. Gross Profit minus your S,G, & A-Selling, General and Administrative Expenses, plus taxes = Bottom Line Net Profit or Loss.

There's more: Total Work in Process Cost = Beginning WIP + Total Manufacturing Costs. Total Work in Process Cost minus Ending WIP = COGM.

2. REQUIRED: There's Product and Period Costs. HINT: Period costs are expenses that are not part of the product cost. List of few examples of each cost.What creates the difference?

3. The main difference between Financial and Managerial Accounting is???

4. This chapter focuses on the difference between Job Order and Process Order Costing. Job Order Costing is used for high-end or custom-made goods, such as custom-made furniture or a yacht. Process Order Costing is used for most of what we manufacture en masse, such as canned goods, cereal, chocolate, paint etc. There are many WIP-Work in Process-accounts that each batch goes through. Direct Materials and Direct Labor are easy to compute. To compute the Manufacturing Overhead, a predetermined Overhead Rate is used-it's an estimate that will be compared to the actual overhead to arrive at an adjustment at year end. It has to be done this way because there's no 'accurate' way to know exactly how much Overhead should be allocated to each Job or Process. For example in a labor intensive factory, which is few these days, at the beginning of the year, you may estimate that your Overhead will be $100,000 and your labor hours will be 50,000 hours or roughly 25 full-time employees. That means your Predetermined Overhead rate is $2 per labor hour ($100,000/50,000 hours). If your factory was capital intensive-more machines than people-as most are-you would use machine hours instead of labor hours. Example: it required 2 labor hours (or machine hours) to make something. Labor at $20/hr. = $40 and the Overhead would be $4 (2 x $2). If the Direct Materials was $50, then your total cost would be $94

(40 + 4 + 50). That means you would probably try to sell it for at least 2x your cost or $188 (2 x $94) or more.

GOOGLE 'Hershey's Chocolate Making Process-Video Results'-it's on U-tube for 5:47...it goes through all the WIP steps: Cleaning, Roasting, Shell Removal, Nibs Ground, Cocoa Separation, and Ingredients Added such as Milk, Sugar etc. This is a great example of Process Order Costing.

4. REQUIRED: List '3' types of products that would use Job Order Costing AND

'3' types that use Process Order Costing. Most factories use Process Order Costing.

ASSIGNMENT 2

1. As reviewed in the previous chapter, the focus in Chapter 21 is Process Order Costing vs. Job Order Costing. Job Order Costing is for a unique product or job...such as a custom-made guitar or, in the service industry, completing an accounting audit for a client. In both Job Order and Process Order, you still have '3' costs: Material, Labor and Overhead, and '3' inventories: Raw Materials, WIP-Work In Process-, and FG-Finished Goods. The Big difference in Process Costing: there are more than '1' WIP accounts-SEE the HERSHEY video in Assignment 1-and the products created are all the same or Homogeneous...and processed in LARGE volumes (paint, canned goods, cereal etc.) With Job Order, there's only '1' WIP account...and the product or service is unique or Heterogeneous.

The Accounting: When finished, all the costs from the last WIP account (in Process Costing) goes into FG-Finished Goods. From FG, when SOLD, the costs go into COGS-Cost of Goods Sold, which then creates your Sales (at least 2x your cost) and A/R-Accounts Receivable.

Conversion Cost is your Labor and Overhead, working on the Materials to create a Finished Good.

Equivalent Units-EQ: Converting all your WIP goods into completed units, based on the % of completion. This starts getting complex. Here's an example: Your school wants to

compute the cost of Instruction-like paying me-for each Full Time-FT- Student. The Total cost of Instruction: $9,000,000. Total Full Time Students: 900; Total Part Time-PT-Students 1000. You can not divide by 1900 because of the PT students. However, you know the PT students, on average, take 60% of FT classes. Here's the math: Multiply 1000 x .60 = 600 FT equivalent students added to 900 FT students = 1500. Divided $9,000,000 by 1500 = $6000 per FT student is what it costs the school to teach each student. That also means that each FT student's tuition would have to be greater than $6000 in order for the school to make money. Whew!

1. REQUIRED:Compute EQ based on you taking 4 classes. Each class requires a term paper. Rather than start '1' and finish, you decided to start all '4' at the same time. You finished '1', and are 50% completed in paper #2, and 75% completed on papers #3 and #4.

What is your EQ for all '4' papers? Or, in other words, IF you had started only '1' at a time, how many papers would you have completed. Show your work.

2. This chapter deals with Sales, Variable and Fixed Costs-FC, Contribution Margin and Break-Even Analysis. Total Variable Costs-VC-are Direct Materials and Direct Labor. As production increases, total VC increases, but the per unit VC stays the same. It's the opposite for FC-property taxes, depreciation, rent, insurance etc-total FC stays the same, but as production increases, the per unit FC Decreases.

The Contribution Margin-CM-definition: Sales minus VC. The CM must be large enough to cover FC and show a profit. Otherwise, you are out of business.

The Break-Even-BE-Analysis is easy: Total Sales minus Total Costs = ZERO...you did not make any money, but you did not lose any money.

2. REQUIRED: Analyze '2' scenarios:

a) To be competitive, you have decided to decrease your sales price. What must happen in order for your profits to either stay the same or increase?

b) You've decided to increase wages, which are Variable Costs. What can you do to maintain or increase your profits?

HINT: In both scenarios, the variables involved: sales price, VC, FC, sales volume, new and existing customers.