A family member asked you to review the accounting system used for Hanna’s, a custom stained glass manufacturing business. The owner currently uses a software package to keep track of her checking account, but she does not produce financial statements. The owner seeks your help in setting up a costing system so that financial statements can be produced on a monthly basis.

REQUIRED

A. What kind of costing system is needed for this setting?

B. You plan to categorize the checkbook data for entry into the financial statement records.

List the categories you might use for these entries. [List only broad categories here; see parts (C), (D), and (E) for more details.]

C. List several costs that might be included in a fixed overhead category.

D. List several costs that might be included in a variable overhead category.

E. List several costs that might be included in direct materials.

F. Write a memo to the owner discussing the alternative choices for the costing system.

Include an explanation of the type of information that would need to be captured to support the costing system.