Question

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 $2,800.00 Table Leg $1.050.00 Drawer $480.00 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 b. Rent for the factory per month Depreciation of factory equipment per month Total Estimated manufacturing overhead $4,000.00 $1,400.00 $600.00 $6,000.00 What is the predetermined manufacturing overhead rate? Step 2 Step 3 The first order you received was to manufacture a table using a table top and four legs. This is your Job #1. The customer that has ordered Job w2. wants a table that is the same as Job 1, but wants to also add a drawer to the table.

Answer 1

Step 1 Determination of the predetermined Manufacturing overhead rate :- Total estimated manufacturing Predetermined overhead cost Manufacturing Overhead Total estimated direct labor Rate = hours $6,000 $500 per direct labour hour 12 Step 2 The first order you received was to manufacture a table using a table top and four legs. This is Job Cost Sheet Job Number Item 1 Date Initiated | Date Completed 5-Dec 26-Dec Direct Materials Direct Labor Amount Hours Rate Amount 2,800 2 hours* 3 employees= 6 hours $30.00 $ 180 Manufacturing Overhead Hours Rate Amount 6 $500 $ 3,000 $ Table Top Table Leg (1050*4) Total 4,200 $ 7,000 $ 180 $ 3,000 Cost Summary Direct Materials $ Direct Labor $ Manufacturing Overhead $ Total Product Cost Unit Product Cost 7,000 180 3,000 10,180 10,180

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. :- Job Cost Sheet Job Number Item 2 15-Dec Date Initiated Date Completed Direct Materials Direct Labor Amount Hours Rate 2,800 1 hour* 3 employees= 3 hours $30.00 Manufacturing Overhead Amount | | Hours Rate Amount $ 90 $500 $ 1,500 $ Table Top Table Leg (1050*4) Drawer Total $ 4,200 $ 480 7,480 $ 90 $ 1,500 Cost Summary Direct Materials Direct Labor Manufacturing Overhead Total Product Cost Unit Product Cost 7,480 90 1,500 9,070 9,070

Credit Step 4 Journal entries General Journal Sr. No. Description 1-Dec Raw Materials To Accounts payable (Being Raw materials purchased on account) Debit $28,000 Dr. $28,000 Dr. $ 7,000 5-Dec Work in Process To Raw Materials (Being Raw materials issued for use in Job #1) $7,000 10-Dec Work in Process (2 hours* 3 employees*$30 per hour) Manufacturing Overheads Salaries and Wages Expense To Salaries and wages payable (Being employee cost incurred) Dr. Dr. 180 $4,500 $2,000 6,680 Dr. $ 7,480 15-Dec Work in Process To Raw Materials (Being Raw materials issued for use in Job #2) $7,480 Dr. $1,400 16-Dec Manufacturing Overheads To Rent Payable (Being Rent for the factory building incurred) $1,400 Dr. Dr. $1,200 17-Dec Advertising Expenses To Advertising Expenses Payable (Being Advertising Expenses incurred) $1,200 $150 $600 Dr. 20-Dec Manufacturing Overheads Depreciation expense To Accumulated depreciation (Being depreciation charged on factory and office equipments) $750 Dr. $ 3,000 22-Dec Work in Process To Manufacturing Overheads $ 3,000 (Being Manufacturing Overheads charged to job #1 @ $500 per direct labour) (500 * 6) Dr. $ 10,180 26-Dec Finished Goods To Work in Process (Being job #1 completed) $10,180 Dr $ 10,180 28-Dec Cost of goods sold To Finished Goods (Being goods sold transferred) $10,180 Dr. $33,000 28-Dec Account Receivable To Sales Revenue (Being goods sold on account) $33,000 Dr 90 31-Dec Work in Process (1 hour* 3 employees* $30 per hour) To Salaries and wages payable (Being direct labor cost incurred) $ 1,500 $ 1,500 31-Dec Work in Process Dr. To Manufacturing Overheads (Being Manufacturing Overheads charged to job #2 @ $500 per direct labour) (500 * 3) Dr. $ 1,550 31-Dec Cost of goods sold To Manufacturing Overheads (Being underapplied overheads charged) $ 1,550

Step 5 T- Accounts Raw materials S To Balance b/d To Accounts payable By Work in Process By Balance c/d 14,480 13,520 $ 28,000 $ $ 28,000 28,000 Work In Process S - $ 14,480 $ 270 $ 4,500 By Finished Goods By Balance c/d $ $ To Balance b/d To Raw Materials To Salaries and wages payable To Manufacturing Overheads 10,180 9,070 $ 19,250 $ 19,250 Finished Goods - To Balance b/d $ $ 10,180 By Cost of goods sold By Balance c/d To Work in Process $ 10,180 $ 10,180 10,180 To Salaries and wages payable To Rent Payable To Accumulated depreciation Manufacturing Overheads $ 4,500 By Work in Process $ 1,400 By Cost of Goods Sold $ 150 By Balance c/d 4,500 1,550 $ 6,050 $ 6,050 Cost of Goods Sold By Balance c/d To Finished Goods To Manufacturing Overheads $ 10,180 $ 1,550 | $ 11,730 $ 11,730 11,730

To Sales Revenue Accounts Receivables $ 33,000 $ 33,000 By Balance c/d $ 33,000 33,000 Sales Revenue $ 33,000 To Balance c/d By Accounts Receivables 33,000 $ 33,000 33,000 To Balance c/d Accumulated depreciation $ 750 By Manufacturing Overheads By Selling & Administration Overheads 150 600 $ 750 750 To Balance c/d Rent Payable $ 1,400 $ 1,400 By Manufacturing Overheads $ $ 1,400 1,400 To Balance c/d Advertising Expenses Payable $ 1,200 Advertising Expenses $ 1,200 $ $ 1,200 1,200 To Balance c/d Accounts Payable $ 28,000 $ 28,000 By Raw Materials 28,000 28,000 To Balance c/d Salaries and wages payable $ 6,770 By Work in Process By Manufacturing Overheads By Salaries and Wages Expense $ 6,770 270 4,500 2,000 6,770 Salaries and wages Expenses To Salaries and wages payable By Balance c/d $ 2,000 $ 2,000 2,000 2,000 $ To Advertising Expenses Payable Advertising Expenses $ 1,200 $ 1,200 By Balance c/d $ $ 1,200 1,200

To Accumulated depreciation Depreciation Expense $ 600 $ 600 By Balance c/d 600 600 Trial Balance Debit Credit $ Accounts Receivables Raw materials Work in process Finished goods 33,000 13,520 9,070 $ $ Accumulated depreciation Accounts payable Rent payable Advertising Expenses Payable Salaries and wages payable Sales revenue, Manufacturing overhead Cost of goods sold Salaries and wages expense Advertising expenses Depreciation expense Total 750 28,000 1,400 1,200 6,770 33,000 - $ $ $ $ 11,730 2,000 1,200 600 71,120 $ 71,120 Manufacturing Overheads are underapplied for the month. Actual manufacturing overheads incurred Applied manufacturing overheads (3000+1500) Underapplied overheads $ 6,050 $ 4,500 $ 1,550

Step 6 Schedule of Cost of Goods Manufactured :- Thunderduck Custom Tables Inc. Schedule of Cost of Goods Manufactured For the Month Ended December 31, 20XX Particulars Raw material used Direct Labor Manufacturing Overheads Total manufacuring costs Beginning inventory of Work in Process Total Cost of Work in process Ending inventory of Work in Process Cost of Goods manufactured $ 14,480 $ 270 $ 4,500 $ 19,250 Add: Add: Less: $ 19,250 $ 9,070 $ 10,180 Add: Thunderduck Custom Tables Inc. Schedule of Cost of Goods Sold For the Month Ended December 31, 20XX Beginning inventory of Finished Goods Cost of Goods manufactured Cost of Goods available for sale Ending inventory of Finished Goods Unadjusted Cost of Goods sold Underapllied overheads charged Adjusted Cost of Goods sold $ $ 10,180 10,180 Less: Add: $ 10,180 $ 1,550 $ 11,730 Step 7 Income Statement for the month Less: Thunderduck Custom Tables Inc. Income Statement For the Month Ended December 31, 20XX Sales Cost of Goods sold Gross margin Salaries and wages Expenses Advertising Expenses Depreciation Expense Net operating income Less: Less: Less: $ $ $ $ $ $ $ 33,000 11,730 21,270 2,000 1,200 600 17,470

Step 8 Additional Questions 1 2 What is the ending balance for raw materials? (See Raw materials T-account above) What is the | What is the ending balance for work in process? (See Work in process T-account above) What is the ending balance for finished goods? (See Finished Goods T-account above) What is the actual manufacturing overhead cost incurred during December before adjustment? (See What is the total applied manufacturing overhead cost during December before adjustment? (3000+1500) What is the unadjusted cost of goods sold? (See Schedule of Cost of Goods sold) Was the manufacturing overhead for the month of December overapplied/underapplied ? What is the amount of Manufacturing overhead overapplied/underapplied? (See above working) What is the adjusted cost of goods sold? (See Schedule of Cost of Goods sold) What is gross margin? ((Gross Margin/Sales)* 100) What is the total prime cost for Job#1? (Direct materials Cost+ Direct labor cost) What is the total conversion cost for job #1? (Direct labor cost+ Manufacturing overhead cost) What is the total product cost for job#1? (See cost summary in Job cost sheet) What was the period cost incurred for the month of December? (Salaries of supervisor +Rent) 13,520 $ 9,070 $ 6,050 $ 4,500 10,180 Underapplied 1,550 $ 11,730 64.45% 7,180 3,180 10,180 5,900 What is the total variable cost incurred for Job #1(assume that all selling and administrative cost and all manufacturing overhead costs are fixed.)? (Direct materials Cost+ Direct labor cost) 7,180 16 25,820 What is the contribution margin for Job #1 (assume that all selling and administrative cost and all manufacturing overhead costs are fixed.)? (Sales- variable cost as per 15 q.) 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? (Fixed manufacturing cost will remain the same irrespective of no. of units produced) (See Manufacturing overheads T-account total above) 6,050

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