Letters

Kiss, I am in college studying to become an accountant. This semester, I have to use a book called Financial and Managerial Accounting 11th edition by Carl S. Warren; James M. Reeve; Jonathan Duchac. For Chapter 17 overview I came across this. It is about Paul Stanley's guitar. Here is what they said: As we discussed in Chapter 16, Paul Stanley of the legendary rock band KISS uses a custom-made guitar purchased from Washburn Guitars. In fact, Paul Stanley designed his guitar in partnership with Washburn Guitars, as have other rock stars like Dan Donnegan of the rock band Disturbed. Washburn's guitars are precision instruments that require high-quality materials and careful craftsmanship. As a result, amateurs and professionals are willing to pay between $1,100 and $10,000 for a PS (Paul Stanley) Series guitar. In order for Washburn to stay in business, the purchase price of the guitar must be greater than the cost of producing the guitar. So, how does Washburn determine the cost of producing a guitar? Costs associated with creating a guitar include materials such as wood and strings, the wages of employees who build the guitar, and factory overhead. To determine the purchase price of Paul Stanley's guitar, Washburn identifies and records the costs that go into the guitar during each step of the manufacturing process. As the guitar moves through the production process, the costs of direct materials, direct labor, and factory overhead are recorded. When the guitar is complete, the costs that have been recorded are added up to determine the cost of Paul Stanley's unique guitar. The company then prices the guitar to achieve a level of profit over the cost of the guitar. This chapter introduces the principles of accounting systems that accumulate costs in the same manner as they were for Paul Stanley's guitar. KISS IS EVERYWHERE! Peter Novak