1. WHAT THE SIMULATION DOES

--------------------------------------------------------------------------------

Shoddy Machining LLC is an advanced, full-cycle managerial and cost accounting

simulation centered on a precision CNC job-shop machine shop. The business owners—

Marcus Vance and Elena Rostova (equal 50/50 partners)—need assistance with their

cost accounting system and hire the student as head cost bookkeeper for a trial

operating month.

The student is responsible for routing source documents, recording shop floor and

merchandising entries across five specialized journals, allocating manufacturing

overhead, and producing formal cost-of-goods-manufactured schedules and financial

reports.

Core Mechanics & System Architecture:

 - 54 Sequential Manufacturing & Operational Transactions:

     * Initial partner capital contributions ($123,000 each) and shop setup.

     * Raw materials procurement (aerospace alloys, titanium, cutting tooling).

     * Direct/indirect material requisitions to production jobs.

     * Shop payroll allocation (Direct Manufacturing Labor vs. Indirect Labor).

     * Application of manufacturing overhead.

     * Job completions, customer deliveries, and billing on credit terms.

 - Three-Tier Perpetual Inventory Accounting:

     * Account 110: Raw Materials Inventory (RM)

     * Account 112: Work in Process Inventory (WIP)

     * Account 114: Finished Goods Inventory (FG)

 - Factory Overhead (FOH) Predetermined Rate Engine:

     * Tracks actual indirect shop costs across 9 detail overhead accounts

       (machine maintenance, factory utilities, indirect labor, supervisor salaries,

       equipment depreciation, cutting fluids/supplies, factory rent/insurance).

     * Applies overhead to Work in Process using a predetermined overhead rate

       (e.g., 130% of Direct Labor cost).

     * Calculates underapplied or overapplied overhead at month-end and closes

       the variance to Cost of Goods Sold.

 - Multi-Journal Routing & Subsidiary Ledgers:

     * Specialized Books of Prime Entry: Sales Journal, Cash Receipts Journal,

       Purchases Journal, Cash Disbursements Journal, and General Journal.

     * Separate customer and supplier subsidiary ledgers reconciled to control accounts.

 - Comprehensive Manufacturing Schedules & Workpapers:

     * Live General Journal, General Ledger, and Trial Balance.

     * Statement of Cost of Goods Manufactured (COGM).

     * Schedule of Cost of Goods Sold (Normal COGS vs. Adjusted COGS).

     * Manufacturing Income Statement & Balance Sheet.

     * Manufacturing Financial Ratios & Benchmark Performance Analysis.

2. WHAT THE STUDENT LEARNS

--------------------------------------------------------------------------------

Unlike introductory retail or service simulations, Shoddy Machining trains students

in the specialized mechanics of manufacturing cost accounting and job-order costing:

A. The Three Elements of Product Cost:

  - Categorizing all factory expenditures into:

      1. Direct Materials (DM): Traced directly to specific job orders via material

         requisitions.

      2. Direct Labor (DL): Shop-floor machinist payroll directly chargeable to jobs.

      3. Manufacturing Overhead (MOH / FOH): All indirect factory costs incurred to

         support production.

B. Inventory Flow through a Manufacturing Facility:

  - Recording physical and financial movements across the three inventory phases:

    Raw Materials Work in Process Finished Goods Cost of Goods Sold

  - Journalizing material purchases into RM, requisitions into WIP, job completions

    into FG, and customer deliveries out of FG into COGS.

C. Factory Overhead Application & Variance Reconciliation:

  - Calculating and applying overhead to WIP jobs.

  - Comparing actual overhead incurred in the FOH Control account against Applied Overhead.

  - Identifying underapplied overhead (actual > applied) or overapplied overhead

    (applied > actual) and posting period-end adjusting entries to close variance to COGS.

D. Preparation of Manufacturing Statements:

  - Constructing the Statement of Cost of Goods Manufactured (COGM):

  - Constructing the Schedule of Cost of Goods Sold (COGS):

      

E. Commercial Job-Shop Sales & Receivables:

  - Executing the standard two-fold perpetual entry on customer delivery:

      1. Record billed sale.

      2. Relieve finished goods.

  - Evaluating job gross profit margins and contract profitability across customer orders.

F. Multi-Member Partnership Equity Accounting:

  - Maintaining equal 50/50 capital accounts for Marcus Vance and Elena Rostova.

  - Allocating final net manufacturing income to partner equity balances on the

    ending Balance Sheet.