Crescent Point Energy Corporation, a Canadian oil and gas company, reported the following information at the end of 2023: inventory purchases of $12.8 million, freight-in costs of $780,000, purchase returns and allowances of $320,000, and a beginning inventory of $4.2 million. During a routine audit, it was discovered that $450,000 worth of inventory items were damaged beyond repair due to improper storage conditions, and these items had no salvage value. The company had an ending inventory of $5.1 million at year-end. Calculate the cost of goods available for sale and the cost of goods sold for Crescent Point Energy Corporation for the year 2023. A medium-sized manufacturing company, XYZ Manufacturing, has recently switched from a traditional costing system to an activity-based costing (ABC) system. The company produces three types of products: standard, deluxe, and premium. Previously, overhead costs were allocated based on direct labor hours. However, management realized that the traditional system was leading to inaccurate product costing, particularly for the premium products, which require more specialized resources. The new ABC system allocates overhead based on multiple cost drivers, such as machine hours, setup time, and quality inspections. Management is now assessing how this switch will impact product pricing, profitability, and decision-making. Discuss the implications of moving from traditional costing to ABC and how it will affect XYZ's overall financial performance.
Crescent Point Energy Corporation, a Canadian oil and gas company, reported the following information at the end of 2023: inventory purchases of $12.8 million, freight-in costs of $780,000, purchase returns and allowances of $320,000, and a beginning inventory of $4.2 million. During a routine audit, it was discovered that $450,000 worth of inventory items were damaged beyond repair due to improper storage conditions, and these items had no salvage value. The company had an ending inventory of $5.1 million at year-end. Calculate the cost of goods available for sale and the cost of goods sold for Crescent Point Energy Corporation for the year 2023. A medium-sized manufacturing company, XYZ Manufacturing, has recently switched from a traditional costing system to an activity-based costing (ABC) system. The company produces three types of products: standard, deluxe, and premium. Previously, overhead costs were allocated based on direct labor hours. However, management realized that the traditional system was leading to inaccurate product costing, particularly for the premium products, which require more specialized resources. The new ABC system allocates overhead based on multiple cost drivers, such as machine hours, setup time, and quality inspections. Management is now assessing how this switch will impact product pricing, profitability, and decision-making. Discuss the implications of moving from traditional costing to ABC and how it will affect XYZ's overall financial performance.
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter8: Specialized Audit Tools: Attributes Sampling, Monetary Unit Sampling, And Data Analytics Tools
Section: Chapter Questions
Problem 30RQSC
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Transcribed Image Text:Crescent Point Energy Corporation, a Canadian oil and gas company, reported the following
information at the end of 2023: inventory purchases of $12.8 million, freight-in costs of
$780,000, purchase returns and allowances of $320,000, and a beginning inventory of $4.2
million. During a routine audit, it was discovered that $450,000 worth of inventory items were
damaged beyond repair due to improper storage conditions, and these items had no salvage
value. The company had an ending inventory of $5.1 million at year-end. Calculate the cost of
goods available for sale and the cost of goods sold for Crescent Point Energy Corporation for
the year 2023. A medium-sized manufacturing company, XYZ Manufacturing, has recently
switched from a traditional costing system to an activity-based costing (ABC) system. The
company produces three types of products: standard, deluxe, and premium. Previously,
overhead costs were allocated based on direct labor hours. However, management realized that
the traditional system was leading to inaccurate product costing, particularly for the premium
products, which require more specialized resources. The new ABC system allocates overhead
based on multiple cost drivers, such as machine hours, setup time, and quality inspections.
Management is now assessing how this switch will impact product pricing, profitability, and
decision-making. Discuss the implications of moving from traditional costing to ABC and how it
will affect XYZ's overall financial performance.
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