Question

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 $3,136 to carpet the consulting firm’s newly leased office. The estimate was based on the following data:

Estimated direct materials:

40 meters at $35 per meter$ 1,400

Estimated direct labor:

24 hours at $20 per hour480

Estimated factory overhead (75% of direct labor cost)360

Total estimated costs$2,240

Markup (40% of production costs)896

Total estimate$3,136

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

11220 meters at $35$700

11424 meters at $35840

Time Ticket No.Description    Amount

H1012 hours at $20$240

H1116 hours at $20320

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

CustomerJackson Consulting DateOctober 1

Date wantedOctober 10

  Date completedOctober 10

Job. No.

ESTIMATE

Direct MaterialsDirect LaborSummary

Amount Amount Amount

40 Meters at $35$24 Hours at $20$Direct Materials$

    Direct Labor

    Factory Overhead

Total$Total$Total cost$

ACTUAL

Direct MaterialsDirect LaborSummary

Mat. Req. No.DescriptionAmountTime Ticket No.DescriptionAmountItemAmount

11220 Meters at $35$H1012 Hours at $20$Direct Materials$

Direct Labor

11424 Meters at $35H1116 Hours at $20Factory Overhead

Total $Total $Total Cost$

Feedback

1 & 2. Include the estimated and actual direct materials and direct labor. Include the estimated and applied factory overhead.

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.)

The direct materials cost exceeded the estimate by $140 because 4 meters of materials were spoiled. The direct labor cost exceeded the estimate by $80 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $60 of factory overhead was allocated because of the increase in direct labor.

Management didn't provide enough direction to complete tasks on budget.

The direct materials cost exceeded the estimate by $75 because 3 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.

Select the correct answer from the above choices.
a

Answer 1

JOB ORDER COST SHEET
ESTIMATE
Direct Materials			Direct Labor			Summary
		Amount			Amount		Amount
40 sq. ft. at $35		1400	24 Hours at $20		480	Direct Materials	1400
						Direct Labor	480
						Factory Overhead	360
Total		1400			480	Total cost	2240
ACTUAL
Direct Materials			Direct Labor			Summary
Mat. Req. No.	Description	Amount	Time Ticket No.	Description	Amount	Item	Amount
112	20 sq. ft. at $35	700	H10	12 Hours at $20	240	Direct Materials	1540
114	24 sq. ft. at $35	840	H11	16 Hours at $20	320	Direct Labor	560
						Factory Overhead	420
Total		1540	Total		560	Total cost	2520

a. The direct materials cost exceeded the estimate by $140 because 4 square feet of materials were spoiled. The direct labor cost exceeded the estimate by $80 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $60 of factory overhead was allocated because of the increase in direct labor.