Essay - Accounting Costs - Sunair Boat Case Question One the Following...

Accounting Costs - SunAir Boat Case

Question One

The following table shows details of ***** Boat Builder's molding department's direct cost and overhead variances:

SunAir ***** Builders, Inc.

Detailed Cost Comparison (per boat hull)

Unit Cost per Unit Cost Actual Price Usage Amount St*****ard ***** Variance Quantity ***** Variance Materials Glass Cloth (sq. ft.) 120 $

11.16) Glass Mix (lbs.) 40 $

15.70) ***** Cost per Unit Cost Actual Rate Efficiency Amount Standard Actual Variance Quantity Variance Variance Direct Labor Mixing (hrs.) 0.5 $

0.24 Molding (hrs.) 1.0 $

2.35) Unit Cost ***** Unit Cost ***** Standard ***** Variance Overhead Ind. Cost (*****) 1 $

***** variances observed in the table above can be traced ********** to the complexities ***** ***** mixing and molding procedure. Production of boat hulls, by its very nature, requires "a great deal of expertise, or 'eyeball'" according to the case study. The following are listed as factors which can affect this process: "too much or ***** little catalyst...too much or too little heat...failure to allow proper time for curing... [and]...spending ***** much time on adjustments to ***** or molding equipment." Therefore, care has to be taken to make sure that both materials (glass cloth and mix) ***** supervision ***** are not wasted. Unfortunately, variances did arise between ***** standard and actual costs.

In the materials category, more ***** cloth (*****26 vs. 120 square feet) and mix (44 *****. 40 pounds) had ***** be used than expected. Also in the category of *****, although the cost per square foot of the glass ***** went down slightly (to $1.80 per square foot), the ***** ***** the glass mix ***** up (to $4.09 per pound). In the labor category, ***** mixing took about as long as expected (.5 hours.), ***** *****.12 hours more time. In addition, the amount paid to labor for mixing rose ***** $21.37 from $20.2*****. And finally, the overhead costs were higher, having incre*****ed from $24.30 per ***** to $25.91.

Question Two

Considering the business situation of SunAir, the setting of standard costs was the right choice to make. The nature of their product line dictated a seasonal production schedule. And in an effort to enhance "credibility with the bankers," improve general o*****ations and possibly expand operations to include other sizes of boat to the product *****, a well founded cost accounting system was vital. The company *****n decided to institute a standard cost ***** "to help control costs and to provide some reference for supervisor's per*****mance."

Clearly the accounting department at ***** company (as ***** as management) needed a *****nchmark upon which ***** base their evaluation of the firm's ***** and operations. Also, one ***** to assume that Randy Kern (molding ***** supervisor) and Bill Schmidt (***** accountant) knew what they ***** doing when they chose the standards and so they must have a cert*****in degree of legitimacy and meaningfulness. Likewise, President Jan Lar*****n is certainly correct ***** he admits that: "Well, some variances are inevitable." Still there is some room for constructive criticism