In: Accounting
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 | $2,100.00 | |||
Table Leg | $700.00 | |||
Drawer | $410.00 | |||
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 | $3,000.00 | ||
b. | Rent for the factory per month | $600.00 | ||
c. | Depreciation of factory equipment per month | $600.00 | ||
Total Estimated manufacturing overhead | $4,200.00 | |||
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, $21,000. | |||
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 $3,500. | ||||
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 $600. | |||
17-Dec | Advertising costs incurred but not paid for the month was $1,600. | |||
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 $26,000 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. 87). (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= $7,210, Net operating income=$13,490 | ||||
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? |
Predetermined manufacturing overhead rate = Estimated Total Manufacturing Overhead / Estimated Total Direct Labor Hours = $ 4,200 / 12 = $ 350 per DLH.
Step 4:
Date | Account Titles | Debit | Credit |
$ | $ | ||
Dec 1 | Raw Materials | 21,000 | |
Accounts Payable | 21,000 | ||
Dec 5 | Work in Process | 4,900 | |
Raw Materials | 4,900 | ||
Dec 10 | Work in Process | 210 | |
Manufacturing Overhead | 3,500 | ||
Salaries and Wages Expense | 2,000 | ||
Salaries and Wages Payable | 5,710 | ||
Dec 15 | Work in Process | 5,310 | |
Raw Materials | 5,310 | ||
Dec 16 | Manufacturing Overhead | 600 | |
Accounts Payable | 600 | ||
Dec 17 | Advertising Expense | 1,600 | |
Accounts Payable | 1,600 | ||
Dec 20 | Manufacturing Overhead | 150 | |
Depreciation Expense | 600 | ||
Accumulated Depreciation | 750 | ||
Dec 22 | Work in Process | 2,100 | |
Manufacturing Overhead | 2,100 | ||
Dec 26 | Finished Goods | 7,210 | |
Work in Process | 7,210 | ||
Dec 28 | Accounts Receivable | 26,000 | |
Sales Revenue | 26,000 | ||
Dec 28 | Cost of Goods Sold | 7,210 | |
Finished Goods | 7,210 | ||
Dec 31 | Work in Process | 105 | |
Salaries and Wages Payable | 105 | ||
Dec 31 | Work in Process | 1,050 | |
Manufacturing Overhead | 1,050 | ||
Dec 31 | Cost of Goods Sold | 1,100 | |
Manufacturing Overhead | 1,100 |
Step 6:
Schedule of Cost of Goods Manufactured For the month ended December 31 |
||
Beginning work in process inventory | $ 0 | |
Add: Manufacturing costs incurred during the month | ||
Beginning raw materials | $ 0 | |
Add: Purchases | 21,000 | |
Less: Ending raw materials | (10,790) | 10,210 |
Direct labor | 315 | |
Manufacturing overhead applied | 3,150 | |
Total manufacturing costs | 13,675 | |
Total cost of work in process | 13,675 | |
Less: Ending work in process | (6,465) | |
Cost of Goods Manufactured | $ 7,210 |
Schedule of Cost of Goods
Sold For the month ended December 31 |
|
Beginning finished goods | $ 0 |
Add: Cost of Goods Manufactured | 7,210 |
Cost of Goods Available for Sale | 7,210 |
Less: Ending finished goods | 0 |
Cost of goods sold ( unadjusted) | 7,210 |
Add: Underapplied MOH | 1,100 |
Cost of Goods Sold ( Adjusted) | $ 8,310 |
Step 7:
Thunderduck Custom Tables
Inc. Income Statement For the month ended December 31 |
||
Sales Revenue | $ 26,000 | |
Less : Cost of Goods Sold | 8,310 | |
Gross Profit | 17,690 | |
Selling and Administrative Expenses | ||
Advertising expenses | $ 1,600 | |
Salaries and Wages Expense | 2,000 | |
Depreciation Expense | 600 | |
Total Selling and Administrative Expense | 4,200 | |
Net operating income | $ 13,490 |
Step 8:
Ending balance of raw materials: $ 10,790
Ending balance of work in process : $ 6,465
Ending balance of finished goods: $ 0
Actual manufacturing overhead incurred : $ 4,250
Applied manufacturing overhead : $ 3,150
Unadjusted cost of goods sold : $ 7,210
Manufacturing overhead was under-applied during the month.
Manufacturing overhead underapplied: $ 1,100
Adjusted cost of goods sold : $ 8,310
Gross margin : $ 17,690
Total prime cost for Job # 1 : $ 5,110
Total conversion cost for Job # 1 : $ 2,310
Total product cost for Job # 1 : $ 7,210
Period cost incurred for December : $ 4,200
Total variable cost incurred for Job # 1 : $ 5,110
Contribution margin incurred for Job # 1 : $ 20,890
Total MOH incurred for 5 tables: $ 4,250