Question

The Brown Printing Company accounts for the services it performs on a job-cost basis. Most jobs take a week or less to complete and involve two or more of Brown’s five operating departments. Actual costs are accumulated by job. To ensure timely billing, however, the company prepares sales invoices based on cost estimates.
Recently, several printing jobs have incurred losses. To avoid future losses, management has decided to focus on cost control at the department level. Since labor is a major element of cost, management proposes a department labor cost report. This report will originate in the payroll department as part of the biweekly payroll and then go to an accounting clerk for comparison with total labor cost estimates by department. If the actual total department labor costs in a payroll are not much more than the estimated total departmental labor cost during that period, the accounting clerk will send the report to the department foreman. If the accounting clerk concludes that a significant variance exists, the report will be sent to the assistant controller. The assistant controller will investigate the cause when time is available, and recommend corrective action to the production manager.

Required:
Evaluate the proposal:
a. Give at least three common aspects of control the department labor cost report proposal complies with. Give an example from the case to support each aspect cited.
b. Give at least three common aspects of control the departmental labor cost report proposal does not comply with. Give an example from the case to support each aspect cited.



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  • CreatedJanuary 09, 2015
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