Determine how the standard cost system in Carton Medical Devices can be used for product costing and inventory valuation. Indicate the efficiencies that can be gained from the system.Examine the use of Cartonâ€˜s standard cost system in product costing for cost analysis, and indicate the intelligence that management is likely to gain using this approach.In 1983, Dr. Franklin Carton, a Northwestern University electrical engineering profes-sor, and his sister, Dr. Allison Carton, a surgeon, patented an electronic medical mon-itoring device. That same year they formed Carton Medical Devices (CMD) in MountÂ Prospect, 15 miles west of Evanston, Illinois, and hired their sister as president. TheÂ device gradually gained wide acceptance at leading hospitals throughout the world.Â Over the years, CMD hired a team of engineers and scientists who developed addi-tional medical devices; by 1995 sales exceeded $150 million.Â CMD bought parts and electronic components from leading U.S. and Asian suppliers.Â However, for proprietary reasons, CMD produced complex mechanical componentsÂ and assembled circuit boards and finished devices in its Mount Prospect plants. InÂ 2006, when revenues were at a record high $475 million, CMD suffered its first operatingÂ loss. In response, CMD hired Talton Consulting Group to evaluate its operations. In lateÂ 2007, key Talton consultants met with the Cartons to discuss their findings.Â Talton believed CMDâ€™s manufacturing processes and production control systemsÂ were well designed and appropriate for its products and the markets they served.Â However, CMD had never developed a cost system linked to its production controlÂ records. Instead, it used two fundamentally different cost systems; neither Talton norÂ the Cartons had faith in either system. Talton believed that some products were prob-ably priced too low to earn a profit and others were priced so high as to invite com-petition. Taltonâ€™s consultants believed the cost numbers were too inaccurate to makeÂ reasonable pricing decisions or to control costs.Â Cost Systems, OverviewFor financial and tax reporting, CMD used a simple half-standard cost system to com-pute costs for the inventory value in its financial statements and tax returns (bookÂ inventory). CMDâ€™s accountants added actual material, labor, and overhead costs toÂ inventory. They reduced inventory by estimated standard product costs when goodsÂ were sold. Each year, CMDâ€™s independent auditors conducted a physical inventoryÂ count and then valued the physical inventory using the same standard costs CMDÂ used to compute cost of goods sold. Typically, the auditorsâ€™ inventory value was lessÂ than CMDâ€™s book inventory by 10â€“15%, although on occasion the physical inventoryÂ value was higher. The Cartons worried that the discrepancies might be from highÂ scrap or theft, but their audit partner believed it was a result of poor recordkeeping.For pricing, CMD used an activity-based cost system (ABC). CMD implementedÂ that system in 1996 by asking employees in each department to estimate the cost ofÂ production processes in their respective departments. Each year Cartonâ€™s account-ing department resurveyed employees in several departments to update their costÂ estimates, but CMD executives worried that some departments overestimated costsÂ to obtain higher budgets and others underestimated costs to impress management.Â Even if a department tried to be accurate, the estimates could be inaccurate becauseÂ there was no way to verify the cost estimates.
Are you looking for a similar paper or any other quality academic essay? Then look no further. Our research paper writing service is what you require. Our team of experienced writers is on standby to deliver to you an original paper as per your specified instructions with zero plagiarism guaranteed. This is the perfect way you can prepare your own unique academic paper and score the grades you deserve.
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.[order_calculator]