Question

1. Job Cost Sheet

   Remnant Carpet Company sells and installs commercial carpeting for office buildings. Remnant Carpet Company uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On October 1, Remnant Carpet Company gave Jackson Consulting an estimate of $3,150 to carpet the consulting firm’s newly leased office. The estimate was based on the following data:

   Estimated direct materials:
   30 meters at $33 per meter	$ 990
   Estimated direct labor:
   24 hours at $30 per hour	720
   Estimated factory overhead (75% of direct labor cost)	540
   Total estimated costs	$2,250
   Markup (40% of production costs)	900
   Total estimate	$3,150

   On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation were completed on October 10.

   The related materials requisitions and time tickets are summarized as follows:

   Materials Requisition No.	Description	Amount
   112	15 meters at $33	$495
   114	19 meters at $33	627

   Time Ticket No.	Description	Amount
   H10	12 hours at $30	$360
   H11	16 hours at $30	480

   Required:

   Enter amounts as positive numbers.

   1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer.

   2. Record the costs incurred, and complete the job order cost sheet.

   JOB ORDER COST SHEET
   Customer Jackson Consulting Date October 1 Date wanted October 10 Date completed October 10 Job. No. ESTIMATE
   Direct Materials			Direct Labor			Summary
   		Amount			Amount		Amount
   30 Meters at $33		$	24 Hours at $30		$	Direct Materials	$
   						Direct Labor
   						Factory Overhead
   Total		$	Total		$	Total cost	$
   ACTUAL
   Direct Materials			Direct Labor			Summary
   Mat. Req. No.	Description	Amount	Time Ticket No.	Description	Amount	Item	Amount
   112	15 Meters at $33	$	H10	12 Hours at $30	$	Direct Materials	$
   						Direct Labor
   114	19 Meters at $33		H11	16 Hours at $30		Factory Overhead
   Total		$	Total		$	Total Cost	$

   What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that the additional meters of material used in the job were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work.)

   1. The direct materials cost exceeded the estimate by $132 because 4 meters of materials were spoiled. The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $90 of factory overhead was allocated because of the increase in direct labor.
   2. Management didn't provide enough direction to complete tasks on budget.
   3. The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled.
   4. The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee.

   Select the correct answer from the above choices.
   

Answer 1

Answer is given below

JOB ORDER COST SHEET Customer Jackson consulting Date October 1 Date wanted October 10 Date completed October 10 Job. No. Direct Material 30 meters at $33 ESTIMATE Direct Labor $990.00 24 hours at $30 Summary $720.00 Direct Material Direct Labor Factory overhead $720.00 Total Cost $990.00 $720.00 $540.00 $2,250.00 Total Direct Material Mat. Req No. Description 112 15 meters at $33 114 19 meters at $33 $990.00 Total ACTUAL Direct Labor Amount Time ticket No. Description $495.00 H10 12 hours at $30 $627.00 H11 16 hours at $30 Summary Amount Items Amount $360.00 Direct Material $1,122.00 $480.00 Direct Labor $840.00 Factory overhead $630.00 $840.00 Total Cost $2,592.00 Total $1,122.00 Total working note: Factory Overhead = 75% of $840= $630 Answer is Option A) The direct materials cost exceeded the estimate by $132 because 4 meters of materials were spoiled. The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $90 of factory overhead was allocated because of the increase in direct labor.