Management estimates each of the three machines will have a useful life of six years. The second machine injects the mixed raw materials into a large sheet of molds of a particular size, depending on the production run.
The system is costly to maintain, requiring regular maintenance every two weeks to keep it running effectively. This new system is capable of producing standard-sized 5x7, 8x10, and 11x14 inch plastic picture frames at a rate of up to 60, frames a month, with little variation in quality.
Inventory costs consist of direct materials, direct labor, and overhead.
Why or why not? Workers manually place a glossy paper picture of an attractive young couple behind the clear plastic in each frame for marketing purposesand the frames are then packaged for sale and shipment.
However, the frames produced were of varying quality and did not sell well. Skilled workers use these tools to craft the wood pieces used in making the picture frames.
Even though the machinery was quite expensive, the plastic frame line is much less laborintensive than the custom hardwood frame line.
They soon realized there was profit to be made in building large frames for use by painting and portrait studios. Early last year, management decided to accelerate its growth by entering the market for smaller, massproduced picture frames of the type sold in most craft and discount retail stores.
Thus, the machines remained idle through the second half of last year, and the company does not plan to produce any more of this type of frame. You and the junior staff auditor on the team have performed most of the audit procedures outlined on the audit program and have documented your findings in the audit papers.
Here, the third machine polishes the frames to remove any burrs or tabs and inserts a clear, hard plastic sheet, which serves as a picture protector. The first machine mixes appropriate quantities of the resins and other liquid and powder materials needed to produce a molded plastic frame.
Sales prices on these mass-produced plastic frames are obviously much lower than those for the custom frames, but management expects to generate a reasonable profit through highvolume production and higher percentage profit margins.
Other than a specially trained employee to operate and monitor the system, the only manual labor required is to place the promotional photo and package the frames. Management wants to be in a position to fill orders on a timely basis and avoid stock-outs, and thus is content to have a considerable amount of both finished goods and raw materials inventories on hand.
You are a second-year audit senior at Spencer and Loveland. Overhead continues to be allocated to both product lines i. Early on, the RX was so effective at mass-producing defect-free frames that management rented out an additional storage facility to hold the finished inventory produced by the new machinery.EyeMax has been an audit client for five years.
Prior audits have generally detected accounting misstatements, and EyeMax’s management has readily made the recommended adjustments. EyeMax Corporation Auto Parts, Inc. K&K, Inc. Evaluation of Audit Differences Considering Materiality When Evaluating Accounting Policies and Footnote Disclosures.
and sale of medical devices for eyes surgeries.
and the five clerk have limited training and mint-body.com company employs eight people with various background The Controller a CPA.1 EyeMax Corporation Evaluation of Audit Differences INTRODUCTION.
To Bill Strickland Prepared by: Date: Oct 5, Reviewed by: Date: Client Name: EyeMax Corporation Subject: Evaluation of Audit Differences Fact: EyeMax was founded in by Wayne Carruth.
It produces and markets a line of devices in optic surgery. The company has recently grown rapidly. "Eyemax Corporation Evaluation Of Audit Differences" Essays and Research Papers Eyemax Corporation Evaluation Of Audit Differences Completing the audit, Reporting to Management, and External Reporting C A S eS INC LU De D IN T h IS Se CTION 12 EyeMax Corporation Auto Parts, Inc.
K&K, Inc. EyeMax Corporation Evaluation of audit differences Auto Parts, Inc. Considering materiality when evaluating accounting policies and footnote disclosures K&K, Inc.
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