Lambeth Custom Cabinets

Subject
Managerial Accounting

Submitted By
Haider ali

Program
BBA
Introduction
Lambeth Custom Cabinets is a small shop that manufactures and then sells custom-made
cabinets. Jack Lambeth is owner of a little cabinet making shop which also has a workshop
where Mr. Jack Lambeth produces cabinets. Although it is not specifically listed in the case
study that the workshop has any employee other than, Mr. Lambeth himself and his son Jack Jr.
As labor is an important part of cabinetmaking, Mr. Lambeth does not like to hire people for
work and then laying people off. If business is slow due to no workforce other than himself and
his son even than he does not hire anybody, but instead he assigns unoccupied workers to general
clean-up and repair work and charges their wages to indirect labor. There are three main things
which are involved in producing custom-made cabinets which are:

a. design,

b. fabrication,

c. installation.

During the design phase of cabinet-making customer's room is measured to ensure the correct
sizing and to customization of each order. Design work is done with computer designing
software or hand drawings. The Customers are given several choices, including color,
accessories, and type of wood to choose The. Estimate is given after all the details have been
finalized by the customer.

Once the design and the estimate are approved, the fabrication phase of cabinetmaking begins.
The cabinets are cut according to the blueprint and customer's specific requests. Cabinets are
assembled and then taken to the place where it must be installed.
Analysis
Mr. Lambeth sold uniquely crafted cupboards. Toward the start of September, he had no
exceptional obligations During the period of September Lambeth carpentry team didn't complete
work. Overhead cost applied to each occupation toward the month's end except if the
employment was done during the month in which case overhead was applied when the
employment was done.

While Lambeth was evaluating the September information, he become worried about the
assembling overhead change. Since he never needed to lay off an employee, the manufacturing
overhead variance (MOV) was in every case enormous in month when business was moderate.
Lambeth appointed inactive specialists to general cleanup and fix work and charged their wages
to circuitous work. Lambeth acknowledged why the manufacturing overhead variance was so
large

Mrs. Carter, a neighbor had halted by the shop one day toward the beginning of September to get
a cost on some bureau she needed constructed. Lambeth’s child Jack Jr talked with her. Jack Kr
was working in the shop while on summer excursion between his first and second year of
graduate business college. He examined Mrs. Carter's arrangements and assessed the expense of
building her cupboards to be $1,625.

In this case study, we record the activities that based on a whole month of September, a record
was taken from the case during the month of September and compiled it, the total sum of the
materials, labor's overhead and finished costs was calculated. After that, the direct materials
direct labor and collection costs was calculated, there was two findings which was summed up
and offered during September, the calculation of raw material supplies, Wi Fi assets, total labor,
direct labor, and direct labor was done in the last stage.

The cabinet's cost price and other companies’ charges and profits and finishing materials and
direct labor cost and overhead and lumber was calculated, and the total cost was estimated. After
all these calculations the data received was put in to make T accounts, which are based on these
activities that based on the debt has based on the month of November, and that includes the T
counts of raw materials work in process finished goods expense and income summary
manufacturing, overhead supplies, inventories, labor all other assets, cost of goods sold, etc. The
two big data was received from the case the information was picked and put it in T accounts than
total them up and a it was collected a larger side either which is jabbered side or either it is credit
side after debt. The data was put in the income statement and balance sheet.

The income statement and balance sheet will be created after that a job sheet will be created in
which entries like the job numbers, materials labor overhead total v WAP, total finished goods
till the September of 30th will be placed. It includes all the stuff that is related to the job. After
that marginal analysis will be done which includes things like what if labor was essentially fixed
variable cost, total variable cost?

Teaching strategy

Job order costing

Job order costing is a good exercise in custom make things and products. If the products
produced in different shapes and sizes and completely different from each other job order costing
is done to find out the estimated cost of a product.

Usefulness of contribution analysis

If a contribution analysis is useful in this circumstance, does that mean we can conveniently
ignore the allocated cost as they are a viable party of that decisions begin made and the context at
the time. In this case, assuming the judgment is made that a more lucrative opportunity is
unlikely to be forgone by taking carter’s order, more contribution is better than less contribution
even if it is not at a level generating a profit as traditionally measured. This question also affords
instructors the opportunity to galvanize a class discussion on cost allocation by asking additional
questions.

Overhead cost

Why are they being allocated?

They are located because they are resource deemed to aid the completion of custom cabinet job.
Even so there is not precisely identifiable, specific amount if each of those resources ‘contained’
in each of the jobs.
How are they being allocated?

In the business case, fifty percent of direct labor cost is added to each job, representing its share
of the overhead cost.

Does the business need to covers its fixed cost?

Yes, but in total. This means that managers do manage a portfolio of job across time, and their
task is to have total portfolio be as profitable as possible.