Piano manufacturing is a manufacturing environment that is well suited to job order costing systems. A piano manufacturer makes many kinds of pianos, each with distinctive characteristics. Pianos can be made in different models with unique wood case designs and other customized features. A finished piano will also reflect the skill and expertise of the artisans who create it. Consequently, pianos are very expensive to produce. It is critical for piano production managers to know the quantity and quality of materials and labor that go into each piano, and to ensure that customer specifications are met. It is also crucial for managers to have an accurate accounting of the associated direct material costs, direct labor costs, and overhead costs attributed to each piano.

You can get a good idea of what is involved in making a piano by going for a virtual tour of the Steinway & Sons piano manufacturing plant in Queens, New York. There you can actually follow the steps in the piano making process, and you can get an appreciation for the art of creating a piano. In this exercise you will see how Steinway and other piano-manufacturing firms might apply job-costing concepts.

Go to the website for Steinway & Sons, manufacturers of pianos. Here you will find lots of information about the company and their commitment to making high quality pianos.

1. Click on "Factory Tour¾Steinway History." Here you can read about the history of piano making in general, and Steinway & Sons in particular. You will also find information that gives you a rough idea of the value of pianos. Refer to the information about Steinway's "piano bank". What is the average value of a concert quality grand piano?

2. Now go to "Showroom¾Catalogue". Read the section on "Craftsmanship" and "The Steinway Tradition". How long does it take to create a grand piano?

3. Go to "Catalogue" and "Rich Rewards". How many pianos does Steinway make each year?

4. Take a look at the pictures in the "Factory Tour" and follow the sequence of steps in making a piano. What are some important direct materials necessary to make a piano?

5. What are some of the processes that occur in the manufacture of a piano?

6. You will notice on the factory tour that one of the first steps in piano making is a process called "rim bending". Who bends the rim of a piano? Would these artisans be direct or indirect labor?

7. Identify several different types of overhead in a piano factory.

8. Give some examples of indirect materials that are part of the piano manufacturing process.(Hint: You may see some in the factory tour.)

9. Which kinds of employees might be considered indirect labor?

10. What kinds of inventory accounts would Steinway use to track the flow of costs through production?

11. What type of document would Steinway use to keep track of the costs of each piano?

12. What is the relationship between a "Work in Process Control" account and the job cost records for all pianos (or batches of pianos) in production?

13. Let's assume that the Los Angeles Philharmonic Orchestra orders one concert quality grand piano. The factory manager authorizes the production of the piano to begin, and he labels the job order "Model D, Job #260". What type of document would the factory manager prepare to initiate the production of this piano?

14. What type of document would authorize the transfer of maple wood into production to begin "Model D, Job #260"? What would the journal entry be to record the transfer of maple wood for the piano rim and case from inventory into production?

15. What documents would serve as the basis for recording the work done on Model D, Job #260 by the craftsmen and artisans? What journal entry would be made to record the labor of the team bending the rim to conform to the mold?

16. What kind of cost drivers would be appropriate for assigning overhead to each completed piano? What journal entry would be made to apply manufacturing overhead to the piano?

17. Suppose that total costs (direct materials, direct labor, and overhead) accumulated during the production of Grand Piano Model D, #260 were $25,000. When this piano is completed what is the journal entry to record the transfer of the piano out of the factory and into the showroom?

18. Assume that each piano completed has one job cost record detailing the costs of production. What is the relationship between the "Finished Goods Inventory" account and the job cost records for all pianos in the showroom?

19. Suppose that the concert grand piano is sold to the Los Angeles Philharmonic for $50,000. What is the journal entry to record the sale of the Model D, #260?

    Now visit Steinway Musical Instruments, Inc. (SMI). Steinway & Sons is the piano division of Steinway Musical Instruments, Inc. Its Selmer division manufactures band instruments. You can find financial information about the Steinway & Sons piano segment at this location. Click on "Steinway Musical Instruments, Inc." and then "Annual Report 1997" to download the annual report. If you go to page 23 of the annual report you will see segment information about the piano division.

20. What were the piano division's sales as a percentage of total sales for both divisions in 1997?

21. Did the piano division as a whole make a profit in 1997?

22. Did the US segment of the piano division make a profit in 1997? Did it made a profit in 1995 or 1996?

23. What is the return on assets for the piano segment as a whole in 1997?

© 2002 by Prentice-Hall, Inc.A Pearson Education Company, Upper Saddle River, New Jersey 07458

PHLIP was originally conceived and developed for Prentice Hall with the expertise of Dan W. Cooper of Active Learning Technologies, Inc.and Scott R. Lyman.

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