Laramie Wire Manufacturing

Case 8.1 Laramie Wire Manufacturing
1. Cost of Sales
The cost of gross sales summation 3% from 2007 to 2008 compared the sales increased 4% in the same breaker point. That ratio is consistent between periods and I do not believe there is anything that should stand out to the auditor.
eld Sales in Receivables
Days Sales in Receivables increased 16% from 2007 to 2008. There might be customers who are not paying due to various different reasons. The auditors wish to drift that the receivables exist, are properly valuated, are within the cutoff period for the audit and the amount is correct for uncollectable accounts.
Inventories
The plastics inventory increased 23% although Copper Rod inventory increased 59%.
destroyed Goods Inventory increased 41% from 2007 to 2008. The bell of plastics decreased from $0.19 to $0.12.The price of cop rod stayed the same at $.48 a pound. The increase in price of plastics can explain why inventories of plastics and copper changed.
The expected comfort of Copper Rod = 5,900,000*.48 = 2,832,000
The expected value of plastics = 1,100,000 * .12 = 132,000

The expected value of plastics is not consistent with carrying costs at lower of cost or market pricing. This area needs to be checked by the auditor.
The square footage allotment too needs further examination.




25% (125,000sq.ft) is allocated to warehousing. Currently the copper rod inventory alone would demand 141,000 sq. ft. which is more than is allocated for the entire inventory.
The auditors should earn sure that all existing inventories have been recorded completely, go to the warehouse and ensure all the inventories are recorded in the inventory ledger.
Accounts Payable
The accounts payable increased 6% temporary hookup inventories increased much higher. This is not consistent and the balances of inventory accounts and payables need to be verified. Inventory should be counted to verify that it is correct and exists.
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