Question

QUESTION 1

1. Step 1	You work for Thunderduck Custom Tables Inc. This is the first month of operations. The company designs and manufactures specialty tables. Each table is specially customized for the customer. This month, you have been asked to develop and manufacture two new tables for customers. You will design and build the tables. This is a no nail, no screw, and no glue manufacturing ( no indirect materials used). You will be keeping track of the costs incurred to manufacture the tables using Job #1 Cost Sheet and Job #2 Cost Sheet.
   	The cost of the direct materials that can be used to manufacture the table are as follows. These cost are on a per unit basis.
   		Table Top	$1,300.00
   		Table Leg	$300.00
   		Drawer	$330.00
   	The company uses a job order costing system and applies manufacturing overhead to jobs based on direct labor hours.
   	The company estimates that there will be 12 direct labor hours worked during the month.
   	The estimated manufacturing overhead cost for the month is:
   	a.	Factory supervisor salary per month	$4,000.00
   	b.	Rent for the factory per month	$800.00
   	c.	Depreciation of factory equipment per month	$600.00
   		Total Estimated manufacturing overhead	$5,400.00
   	What is the predetermined manufacturing overhead rate?
   Step 2	The first order you received was to manufacture a table using a table top and four legs. This is your Job #1.
   Step 3	The customer that has ordered Job #2, wants a table that is the same as Job #1, but wants to also add a drawer to the table.
   Step 4	The following is a list of transactions that need to be recorded for the company for activity in the month of December. Record those in the "General Journal" tab of the excel file using the proper format. Please use the following accounts: Accounts Receivables, Raw materials, Work in process, Finished goods, Accumulated depreciation, Accounts payable, Salaries and wages payable, Sales revenue, Manufacturing overhead, Cost of goods sold, Salaries and wages expense, Advertising expenses, and Depreciation expense.
   1-Dec	Raw Materials purchased on account, $13,000.
   5-Dec	All Raw Materials needed for Job #1 were requisitioned from the material storage for use during the month. Assume all materials are direct. (After you journalize this entry please enter the information into Job #1 Cost Sheet)
   10-Dec	The following employee costs were incurred but not paid during the month:
   	There are three assembly employees that spend 2 hours each, $35 per hour to make the table for Job #1. (After you journalize this entry please enter the information into Job #1 Cost Sheet)
   	Salary for supervisor of the factory $4,500.
   	Administrative Salary $2,000.
   15-Dec	All Raw Materials needed for Job #2 were requisitioned from the material storage for use during the month. Assume all materials are direct. (After you journalize this entry please enter the information into Job #2 Cost Sheet)
   16-Dec	Rent for the month of December for the factory building incurred but not paid $800.
   17-Dec	Advertising costs incurred but not paid for the month was $1,200.
   20-Dec	Depreciation for the month of December was recorded on equipment was $750 ($150 for equipment used in the factory and the remainder for equipment used in selling and administrative activities).
   22-Dec	Manufacturing overhead cost was applied based on direct labor hours to Job #1 based on the POHR determined on the "Job Cost Sheet". (After you journalize this entry please enter the information into Job #1 Cost Sheet)
   26-Dec	Job #1 was completed and transferred to Finished Goods during the month.
   28-Dec	The completed table from Job #1 was sold on account to the customer for $18,000 during the month. (Hint: Make sure to account for the cost of the table that was sold using the cost from the job cost sheet.)
   31-Dec	Direct labor cost incurred but not paid for three employees to start manufacturing Job #2. The employees only worked one hour each, three hours total, $35 per hour during the month and they did not complete their work on the job. (After you journalize this entry please enter the information into Job #2 Cost Sheet)
   31-Dec	Manufacturing overhead cost was applied based on direct labor hours to Job #2 based on the POHR. Only three direct labor hours were worked on Job #2 during the month. (After you journalize this entry please enter the information into Job #2 Cost Sheet)
   31-Dec	Any underapplied or overapplied overhead for the month was closed out to Cost of Goods Sold.
   Step 5	Post the journal entries that you recorded on the "General Journal" tab to the "T-accounts" tab. This is the company's first month of business, so there will not be any beginning balances. Compute the balance for each T-account after all of the entries have been posted.
   Step 6	Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold on the "Schedule of COGM and COGS" tab for Job #1 and Job #2 that were worked on during the month by the company. Make sure to follow the format noted in your book (pg. 109). (Hint: This is the company's first month of operations and therefore the beginning balances will be zero.)
   Step 7	Prepare an Income Statement for the month using the Traditional Format on the "Income Statement" tab.
   Step 8	Answer the additional questions below
   	Check Figure: Cost of Goods Manufactured= $5,410, Net operating income=$7,390
   	What is the ending balance for raw materials?
   	What is the ending balance for work in process?
   	What is the ending balance for finished goods?
   	What is the actual manufacturing overhead cost incurred during December before adjustment?
   	What is the total applied manufacturing overhead cost during December before adjustment?
   	What is the unadjusted cost of goods sold?
   	Was the manufacturing overhead for the month of December overapplied/underapplied ?
   	What is the amount of Manufacturing overhead overapplied/underapplied?
   	What is the adjusted cost of goods sold?
   	What is gross margin?
   	What is the total prime cost for Job#1?
   	What is the total conversion cost for job #1?
   	What is the total product cost for job#1?
   	What was the period cost incurred for the month of December?
   	What is the total variable cost incurred for Job #1(assume that all selling and administrative cost and all manufacturing overhead costs are fixed.)?
   	What is the contribution margin for Job #1 (assume that all selling and administrative cost and all manufacturing overhead costs are fixed.)?
   	What would be the actual (not applied) total fixed manufacturing overhead cost incurred for the company for the month if the order in Job #1 is for five tables instead of one table assuming this cost is with in the relevant range?

Answer 1

Solutions:

Predetermined Overhead Rate

Estimated Overhead Cost / Estimated Labor hours

= 5400 / 12

450

Journal Entries - ThunderDuck Custom tables Inc,
Date	Particulars	Debit	Credit
01-Dec	Raw Materials	13000
	Accounts Payable		13000
	(Purchased Raw materials on account)
05-Dec	Work In Process	2500
	Raw Materials		2500
	( Materials Required for Job 1 Requisitioned)
10-Dec	Work in Process	210
	Manufacturing Overhead	4500
	Salaries amd Wages Expense	2000
	Salaries and Wages Payable		6710
	(To record Employee Costs incurred 3 employees*2 hours @ $35 per hour totalling to $180 and Factory supervisors salary and administrative Salary Expense))
15-Dec	Work In Process	2830
	Raw Materials		2830
	( Materials Required for Job 2 Requisitioned)
16-Dec	Manufacturing Overhead	800
	Accounts Payable		800
	(To record the factory rent)
17-Dec	Advertising Expense	1200
	Accounts Payable		1200
	( To record advertising expenses incurred but not paid)
20-Dec	Depreciation Expense	600
	Manufacturing Overehead	150
	Accumulated Depreciation		750
	(To Record depreciation expense on factory and selling and administrative expense)
22-Dec	Work in Process	2700
	Manufacturing Overhead		2700
	(Manufacturing overhead applied @ 6 hours * 450 per hour)
26-Dec	Finished Goods	5410
	Work in Process		5410
	(To record completeion of Job#1 )
28-Dec	Cost of Goods sold	5410
	Finished Inventory		5410
	(To record cost of goods sold to finished goods inventory)
	Accounts Receivable	18000
	Sales Revenue		18000
	(Sold Completed table to customer)
31-Dec	Work In Process	105
	Salaries and Wages Payable		105
	(To record Employee Costs incurred 3 employees*1 hours @ $35 per hour)
31-Dec	Work in Process	1350
	Manufacturing Overhead		1350
	(Manufacturing overhead applied @ 3 hours * 450 per hour)
31-Dec	Cost of Goods Sold	1400
	Manufacturing Overhead		1400
	(Underapplied overhead closed to cost of goods sold)

T-Accounts

Raw Materials				Accounts payable
	-
01-Dec	13000	05-Dec	2500			01-Dec	13000
		15-Dec	2830			16-Dec	800
						17-Dec	1200
Bal	7670					Balance	15000

Work In Process				Manufacturing Overheads
05-Dec	2500	26-Dec	5410
10-Dec	210			10-Dec	4500	22-Dec	2700
15-Dec	2830			16-Dec	800	31-Dec	1350
22-Dec	2700			20-Dec	150	31-Dec	1400
31-Dec	105
31-Dec	1350
Bal	4285

Salaries Expense				Salaries and Wages Payable
10-Dec	2000					10-Dec	210
Bal	2000					10-Dec	4500
						10-Dec	2000
						31-Dec	105
						Balance	6815

Accumulated Depreciation				Depreciation Expense
		20-Dec	150	20-Dec	600
		20-Dec	600	Balance	600
		Balance	750

Finished Goods				Cost of Goods Sold
26-Dec	5410	26-Dec	5410	26-Dec	5410
				31-Dec	1400

ThunderDuck Custom tables Inc,
Cost of Goods Manufactured Schedule
For the Month Ended December 31
Work in process Dec 01		0
Direct materials used	$5,330
Direct labor	315
Manufacturing overhead applied	4,050
Total manufacturing costs	$9,695	$9,695
Total cost of work in process		$9,695
Less: Work in process, Dec 31		$4,285
Cost of goods manufactured		$5,410

Cost of Goods Sold Schedule
Finished goods, May 1		0
Cost of goods manufactured		5,410
Cost of goods available for sale		5,410
Finished goods, May 31		0
Cost of goods sold (Unadjusted)		5,410
Add: Underapplied Overhead		$1,400
Adjusted Cost of Goods Sold		$6,810

Income Statement
Sales		18000
Less: Cost of goods sold		$6,810
Gross Profit		$11,190
Less: Operating Expenses
Salaries	2000
Deprecication	600
Advertising Expense	1200
Total Operating Expenses		3800
Net Operating Income		$7,390

Date	Direct Materials	Direct Labor	Manufacturing Overhead
Beg.	$2,500	$210	$2,700
Dec
Cost of completed job
Direct materials $15,000	2500
Direct labor   9,000	$210
Manufacturing overhead   13,000	$2,700
Total cost $37,000	5410

Job Cost Sheets
Job No. 2
Date	Direct Materials	Direct Labor	Manufacturing Overhead
Dec	$2,830	$105	$1,350