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 $1,800.00

Table Leg $550.00

Drawer $380.00

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 $1,400.00

c. Depreciation of factory equipment per month $600.00

Total Estimated manufacturing overhead $6,000.00

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, $18,000.

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, $20 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 $1,400. 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 $23,000 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, $20 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= $7,120, Net operating income=$10,130

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

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.				Table
	Predetermined Overhead Rate	6000/12	$                    500
	Estimated Overhead/Allocation Base
Date	Account	Debit	Credit
Sep 1	Raw Material Inventory	$             18,000
Sep 1	Accounts Payable		$              18,000
	(Purchase of Raw Material)
Sep 5	Work in Process Inventory 1800+(550*4)	$                4,000
				Actual
Sep 5	Raw Material Inventory		$                4,000
	(Requisition of direct and indirect mat)
Sep 10	Work in Process Inventory	$                   120
Sep 10	Manufacturing Overhead	$                4,500		Actual
Sep 10	Salaries Expense	$                2,000
Sep 10	Salaries and Wages Payable		$                6,620
	(being labor cost recorded - direct and indirect)
Sep 15	Work in Process Inventory 1800+(550*4)+380	$                4,380
	Raw Material Inventory		$                4,380
	(Requisition of direct and indirect mat)
Sep 16	Manufacturing Overhead	$                1,400
	Accounts Payable		$                1,400
Sep 17	Advertising Expense	$                1,600
	Accounts Payable		$                1,600
Sep 20	Manufacturing Overhead	$                   150		Actual
Sep 20	Depreciation-Office	$                   600
Sep 20	Accumulated Depreciation		$                    750
	(being ACTUAL overhead recorded)
Sep 22	Work in Process Inventory 500*6	$                3,000
Sep 22	Manufacturing Overhead		$                3,000	Applied
	(Overhead applied)
	(Predetermined Overhead Rate*Allocation Base)
Sep 26	Finished Goods Inventory	$                7,120		Cost of Goods Manufactured
Sep 26	Work in Process Inventory		$                7,120
Sep 28	Accounts Receivable	$             23,000
Sep 28	Sale		$              23,000
Sep 28	Cost of goods sold	$                7,120		Cost of Goods Sold
Sep 28	Finished Goods Inventory		$                7,120
Sep 31	Work in Process Inventory	$                      60
Sep 31
Sep 31	Salaries and Wages Payable		$                      60
	(being labor cost recorded - direct and indirect)
Sep 31	Work in Process Inventory 500*3	$                1,500
Sep 31	Manufacturing Overhead		$                1,500	Applied
	(Overhead applied)
	(Predetermined Overhead Rate*Allocation Base)
Sep 31	Cost of Goods Sold	$                1,550
Sep 31	Manufacturing Overhead		$                1,550

Raw Material
Debit		Credit
Sep1	$       18,000	Sep 5	$       4,000
		Sep 15	$       4,380
Ending	$         9,620
Work in Process
Debit		Credit
Sep 5	$         4,000	Sep 26	$       7,120
Sep 10	$             120
Sep 15	$         4,380
Sep 22	$         3,000
Sep 31	$               60
Sep 31	$         1,500
Ending	$         5,940
Finished Goods
Debit		Credit
Sep 26	$         7,120	Sep 28	$       7,120
Ending
Manufacturing Overhead
Debit		Credit
Sep 10	$         4,500	Sep 22	$       3,000
Sep 16	$         1,400	Sep 31	$       1,500
Sep 20	$             150	Sep 31	$       1,550
Cost of Goods Sold
Debit		Credit
Sep 28	$         7,120
Sep 31	$         1,550

Job Cost Sheet for Job No 1
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date 12/5	$                4,000
Date 12/10		6	$                     20	$        120
Date 12/22					6	$        500	$       3,000
Cost Summary			Units Shipped
Direct Material	$                4,000		Date	No	Balance
Direct Labor	$                    120
Manufacturing Overhead	$                3,000
Total Product Cost	$                7,120
Unit Product Cost	$                7,120
Job Cost Sheet for Job No 2
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date 12/15	$                4,380
Date 12/31		3	$                     20	$          60
Date 12/31					3	$        500	$       1,500
Cost Summary			Units Shipped
Direct Material	$                4,380		Date	No	Balance
Direct Labor	$                      60
Manufacturing Overhead	$                1,500
Total Product Cost	$                5,940
Unit Product Cost	$                5,940

Cost of Goods Manufactured:
Finished goods inventory, beginning			$              -
Work in process inventory, beginning		$                -
Direct materials:
Direct materials inventory, beginning	$                -
Direct materials purchases	$       18,000
Cost of direct materials available for use	$       18,000
Direct materials inventory, ending	$        -9,620
Cost of direct materials placed in production	$         8,380
Direct labor	$             180
Factory overhead Applied	$         4,500
Total manufacturing costs		$       13,060
Total work in process during period		$       13,060
Work in process inventory, ending		$        -5,940
Cost of goods manufactured			$       7,120
Underapplied/(overapplied overhead)			$       1,550
Cost of finished goods available for sale			$       8,670
Finished goods inventory, ending			$              -
Cost of goods sold			$       8,670
Incme Statement:
Sales Revenue		$       23,000
Less: Cost of Goods Sold:
COGS	$         8,670
		$         8,670
Gross Margin		$       14,330
Less: Selling and Admin:
Salary	$         2,000
Dep	$             600
Advertising	$         1,600	$         4,200
		$       10,130

What is the ending balance for raw materials?	$                9,620
What is the ending balance for work in process?	$                5,940
What is the ending balance for finished goods?	$                       -
What is the actual manufacturing overhead cost incurred during Sepember before adjustment?	$                6,050	4500+1400+150
What is the total applied manufacturing overhead cost during Sepember before adjustment?	$                4,500	3000+1500
What is the unadjusted cost of goods sold?	$                7,120
Was the manufacturing overhead for the month of Sepember overapplied/underapplied ?	Under Applied
What is the amount of Manufacturing overhead overapplied/underapplied?	$                1,550
What is the adjusted cost of goods sold?	$                8,670
What is gross margin?	$             14,330	23000-8670
What is the total prime cost for Job#1?	$                4,120	4000+120	RM+Labor
What is the total conversion cost for job #1?	$                3,120	3000+120	Labor+Overheads
What is the total product cost for job#1?	$                7,120	4000+3000+120	RM+Labor+Overheads
What was the period cost incurred for the month of Sepember?	$                4,200	2000+600+1600	Non Manufacturing
What is the total variable cost incurred for Job #1	$                4,120	4000+120
What is the contribution margin for Job #1	$           234,880	23000-4120
What would be the actual (not applied)	$                6,000	12*500	Since only 12 hours availabe for the month