Bennett Body Company: Case Analysis

Bennett Body Company: Case Analysis

Financial and Managerial Accounting

10/04/2015

Abstract

This is a paper about a Company named “Bennett Body Company” which is a custom manufacturer of truck bodies. This paper tries to answer some questions about the two different cost accounting systems of two different companies, Conley System and Bennett System. There are some comparisons between these two comp systems. And also there are some suggestions based on the system suitable for the company.

As company, Bennett Body Company used job order costing system for accumulating the cost of production. But Conely Corporation uses process costing for calculating the amount of cost production. As the Bennett Body Company follows the system of costing products on a per job order basis it had a higher cost of paperwork. As per the information company has products unique from each other. Company makes products based on customer specification making unique with each other. But Conely has its own standard design. Based on the standard design Conely’s system costs of production follows the department basis. In Conley system there is less work than in Bennett system Conley only compiles the actual aggregate labor, overhead costs, and material with the information on the number of units produced. They also consider the paperwork which is required for the annual calculation of the standard cost figures for the 12 different models.

Different components like changing material prices, labor rates, material waste or savings, labor costs affects the direct cost variance in Conley system. We don’t have any information regarding the distribution of the cost for labor and materials and also there is nothing mentioned about the distribution of overhead variance to identify investment and volume variances.

When we have to think about standard cost of factory overhead we can assume that the company may did some assumptions to its total factory overhead for the year. They might have considered the possible changes in prices as in the case of supervision and also for supplies. There could be the overhead assessments based on the length of processing time, departments or in total. Normally per unit overhead cost is low in periods of expansion and high during the period of contraction. With such assumptions company might have worked with the average price and average units produced for certain time period in recent years avoiding the cyclical perversity. With the careful analysis we can find there is overhead rate per direct labor dollar which was calculated by dividing overhead cost per department by the estimated labor cost.

Conley’s unit standard, if genuinely created; give the premise to planning spending plans by the office for direct work and material expenses. There should be a monthly budget to support control of production overhead costs as the Conley’s standard overhead is not the actual budget. Lack of the repetitive jobs makes cost control difficult in Bennett’s custom job order environment.

Bennett ought to stay with its present framework, aside from changing to a yearly foreordained overhead rate so that valuing choices aren't contorted by short-term, month to month volume vacillations.

With the above information some suggestions for the company will be:

Standard expenses are produced from previous year's encounters and achievements and a few conformities from every office's supervisors. On the off chance that our item's business volume is occasional in nature, it is ideal to have our overhead distribution rate change to month to month from every year. If not, we could stick to yearly overhead rate for simplicity of calculation.

Bennett ought to keep up its job order costing since it focuses on assembling modified trucks. Every model that they deliver may not be relevant for future requests and they at times get arranges that require changes on past models.

With the end goal Bennett should enhance its costing framework, they may fuse standard occupation costing with