of starting a second production shift to support future sales if necessary ; therefore , increased production will be obtainable through purchasing additional equipment or increasing production hours . At this time , however , the president is not considering a second shift due the additional $ 1.00 per hour shift differential that would be necessary to pay the hourly second shift workers .
The company had a cash flow problem in 2005 but has always managed to make all payments on a timely basis . The president wishes to increase the amount of cash on hand in the future so that the company will have a greater margin of safety . To date , the company has not had difficulty obtaining financing for expansion and does not foresee any future difficulties in obtaining necessary funding for legitimate purposes .
The company has paid a consistently good dividend to the stockholders . The president would like to continue this policy in the future .
DEPARTMENT STRUCTURE
Fantastic , Inc . has two separate production departments - one for each of the paint types . Since the end products are not distinguishable , the company uses process costing employing a FIFO inventory .
Absorption costing is used for all outside reports . All non-direct fixed costs are allocated using various allocation bases as indicated throughout the project . The Company does not use a full ABC costing system ; however , it does employee some of the ABC concepts in the budgeting process .
The administrative department handles all of the purchasing , accounting , and secretarial duties in a highly efficient manner . The need for separate departments is not necessary at this time .