Cost Management Systems – Part II

Go to La-Z-Boy’s website (www.la-z-boy.com) and click on the “Our Furniture Line” tab. Then click on the “Recliners” icon. Find and compare the characteristics (size and movement) and options (types and color of fabrics) available for the Artie, Atlas, and Baxter recliner models. In addition, think about how and where these products may be purchased. (1-page response is required.)

a. What type of costing system do you think would work best for La-Z-Boy in manufacturing recliners? Give three (3) reasons/rationales for using the type of system you chose.

b. Do you think that an activity-based costing system could be used for the
La-Z-Boy recliners? Why or why not?

La-Z-Boy Cost Management Systems

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Cost Management Systems

La-Z-Boy is an American furniture firm that manufactures and sells furniture globally. The company has a wide range of furniture with different designs and types (La-Z-Boy company, 2015). The essential costing system is the job costing system. The job costing system involves the accumulation and collection of cost information of a product during the process of manufacturing and production (Altawati et al., 2018). The main reason why the company should use the job costing system is they have a variety of products and designs as well different customers. All the furniture has different customers, designs, labor, and materials. The main reasons for using the job costing system are:

Customized orders

Most of the manufactured products are made to order. The job costing system would be efficient since the manufacturing company will assign the costs to the individual units that are manufactured in small batches and customized to meet the expectations and demands of the customer.

Cost Allocations

Considerably, in production, the manufacturer relies on small batches that consist of a group of six to eight workers who work on a set number of hours. Therefore, the use of the job costing system means that the company will direct the labor costs, the materials, and the manufacturing overheads that can be easily allocated, thus offering effective costing that can be managed to make better decisions.

Job Cost record

The Job costing system will help the company to effectively document the cost of direct materials such as the supplies, materials, and labor costs. This will make the cost measurement more accurate, which makes it possible for the management to make effective decisions that can guide the company and improve the manufacturing process.

The Activity Based Costing System

The Activity Based Costing (ABC) system can be used by the company for a number of reasons. The ABC system identifies and assigns the cost of every Activity in the organization according to the consumption of each product and service (Almeida and Cunha, 2017). In the manufacturing process, the company has to utilize resources that are shared in the manufacture of different furniture.  In the consumption of these resources, there are other costs that are established, which include maintenance, supervision, energy, and labor. Therefore, the job costing system will enable the company to allocate the cost of production effectively and identify the cost of all the activities in different phases such as product distribution, product design, customer services, and marketing.  ABC method is more suitable since it assigns the indirect and overhead costs that are linked to the services and products being offered by the company. ABC is essential in such a manufacturing business since it will enhance the reliability and accuracy pf cost data and offer a better classification of costs that is incurred during the production process.

References

Almeida, A., & Cunha, J. (2017). The implementation of an Activity-Based Costing (ABC) system in a manufacturing company. Procedia Manufacturing, 13, 932-939.

Altawati, N. O. M. T., Kim-Soon, N., Ahmad, A. R., & Elmabrok, A. A. (2018). A Review of Traditional Cost System versus Activity Based Costing Approaches. Advanced science letters, 24(6), 4688-4694.

La-Z-Boy company (2015). Retrieved from: https://www.la-z-boy.com/

DISCUSSION QUESTION 3-2

MA610 Managerial Accounting

Lesson 3: Cost Management Systems – Part II

Upon completion of the Required Readings, write a thorough, well-planned narrative answer to the following discussion question.  Rely on your Required Readings and the Lecture and Research Update for specific information to answer the discussion question, but turn to your original thoughts when asked to apply, evaluate, analyze, or synthesize the information.  Your Discussion Question response should be both grammatically and mechanically correct, and formatted in the same fashion as the question itself.  If there is a Part A, your response should identify a Part A, etc.  In addition, you must appropriately cite all resources used in your responses and document in a bibliography using APA style.

Discussion Question 2 (50 points)

Go to La-Z-Boy’s website (www.la-z-boy.com) and click on the “Our Furniture Line” tab.  Then click on the “Recliners” icon.  Find and compare the characteristics (size and movement) and options (types and color of fabrics) available for the Artie, Atlas, and Baxter recliner models.  In addition, think about how and where these products may be purchased.   (1-page response is required.)

1. What type of costing system do you think would work best for La-Z-Boy in manufacturing recliners? Give three (3) reasons/rationales for using the type of system you chose.

1. Do you think that an activity-based costing system could be used for the
   La-Z-Boy recliners? Why or why not?

Grading Rubric

Please refer to the rubric on the following page for the grading criteria for this assignment.