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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Communication

Carol Creedence, the plant manager of the Clearwater Company’s Revival plant, has prepared the following graph of the unit costs from the job cost reports for the plant’s highest volume product. Product CCR:

images

Carol is concerned about the erratic and increasing cost of Product CCR and has asked for your help. Prepare a hall-page memo to Carol, interpreting this graph and requesting any additional information that might be needed to explain this situation.

To determine
Half page memo to C Company.

Explanation

MEMO

FROM:

XYZ

Accountant

TO:

Mr. C

Plant Manager

Company C.

Re: Interpretation of graph and information needed to explain the current situation.

Dear Sir,

The graph of job cost of Product CCR indicates that there are certain important trends prevalent. On the first instance, one can observe that there is a steady increase in unit cost over the period with the unit cost increasing significantly over the time. Secondly, there appears to be a sturdy and consistent phenomenon known as ‘Friday effect’. The unit cost increases heavily on Fridays, then falls on each Mondays.

The ‘Friday effect’ is a result of reduction in efficiency of workers and laborers on Fridays. It may be due to the fact that it is the last day of working week. If this phenomenon is found to happen this is not product related, it must appear throughout the plant. The management must acquire all the job cost for all other products in the plant for testing this phenomenon...

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