Question

The Wadswad Corporation manufactures both standard and customized electrical control boards for automated manufacturing machinery. The company was started by an electrical engineer and a salesman for a machinery company when they saw a demand for systems integration support by companies who were purchasing customized electrical control boards. Since neither of their former employers seemed interested in providing systems integration support for customized electrical control boards, they started manufacturing control boards and offered complete systems integration support to companies desiring this service. The firm was successful from the start and grew quickly. As the number of employees and sales increased, management began to computerize the firm’s accounting system. First, payroll was computerized, and then accounts receivable and accounts payable were computerized. The company is now ready to implement a new computer system to control its WIP inventory. The firm uses a job costing system. WIP numbers are established to control the manufacture of both standard and customized control boards. Boards usually are produced in batches of 10 to several hundred units. Fred Beam, the controller of Wadswad, has just returned from a meeting with the programmer who is implementing the new computer system for WIP. The programmer explained the proposed structure of the master WIP file and the types of transactions that will be processed against the file. These structures are outlined below. Each record in the master WIP file will contain the following data:
Field 1.................................................. WIP number
Field2 .................................................. Units started
Field 3 ................................................. Units spoiled
Field 4 ................................................. Materials cost
Field 5 ................................................. Direct labor cost
Field 6 ................................................. Total cost
Field 7 ................................................. Expected completion date
The WIP number, number of units started, and expected completion date will be entered into the computer when a job is authorized to begin production. The following four types of transactions will be processed:
1. Materials requisitions. The cost of materials requisitioned for each job will be posted to field 4 of the master WIP file, which accumulates the total materials cost of a job. The cost of materials requisitioned for each job also will be posted to field 6 of the master WIP file, which is used to accumulate the total cost of each job.
2. Job time tickets. The direct labor cost for each job will be posted to field 5 of the master WIP file, which accumulates the total labor cost of a job. The direct labor cost for each job also will be posted to field 6 of the master WIP file, which is used to accumulate the total cost of each job. Applied overhead will be computed as a percentage of direct labor cost. Applied overhead will be posted to field 6 of the master WIP file, which is used to accumulate the total cost of each job.
3. Spoiled- production reports. Units spoiled in production for each job will be posted to field 3 of the master WIP file, which accumulates the total units spoiled in production for each job. Special messages will be printed during processing if the spoilage rate exceeds management’s expectations.
4. Completed- production reports. When a job is complete, the computer system will report the total cost of the job and also the per-unit cost. The date of completion will be compared with the expected date of completion, field 7 in the master WIP file. Special messages will be printed during processing if a job is completed late.

Required
a. The new computer- based WIP system will provide summary accounting data that must be posted periodically to the firm’s general ledger. Prepare the standard journal entries that Fred Beam, the controller of Wadswad, could use to document how the expected outputs of the new system will affect the general ledger.
b. Are accounting- related data the only type of output this system will provide? Discuss.



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  • CreatedFebruary 26, 2015
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