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 $1,400.00

Table Leg $400.00

Drawer $340.00

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 $4,500.00

b. Rent for the factory per month $900.00

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, $14,000. 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 $5,000. 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 $900.

17-Dec Advertising costs incurred but not paid for the month was $1,400. 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 $19,000 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= $6,120, Net operating income=$7,330

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

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Predetermined Overhead Rate	Estimated Overhead/Allocation Base	6000/12	500
Date	Account	Debit	Credit
Dec 1	Raw Material Inventory	14000
Dec 1	Accounts Payable		14000
	(Purchase of Raw Material)
Dec 5	Work in Process Inventory	1800
Dec 5	Raw Material Inventory		1800
	(Requisition of direct and indirect mat)
Dec 10	Work in Process Inventory	120
Dec 10	Manufacturing Overhead	5000
Dec 10	Salaries Expense	2000
Dec 10	Salaries and Wages Payable		7120
	(being labor cost recorded - direct and indirect)
Dec 15	Work in Process Inventory	2140
	Raw Material Inventory		2140
	(Requisition of direct and indirect mat)
Dec 16	Manufacturing Overhead	900
	Accounts Payable		900
Dec 17	Advertising Expense	1400
	Accounts Payable		1400
Dec 20	Manufacturing Overhead	150
Dec 20	Depreciation-Office	600
Dec 20	Accumulated Depreciation		750
	(being ACTUAL overhead recorded)
Dec 22	Work in Process Inventory 500*6	3000
Dec 22	Manufacturing Overhead		3000
	(Overhead applied)
	(Predetermined Overhead Rate*Allocation Base)
Dec 26	Finished Goods Inventory	4920
Dec 26	Work in Process Inventory		4920
Dec 28	Accounts Receivable	19000
Dec 28	Sale		19000
Dec 28	Cost of goods sold	4920
Dec 28	Finished Goods Inventory		4920
Dec 31	Work in Process Inventory	60
Dec 31
Dec 31	Salaries and Wages Payable		60
	(being labor cost recorded - direct and indirect)
Dec 31	Work in Process Inventory 500*3	1500
Dec 31	Manufacturing Overhead		1500
	(Overhead applied)
	(Predetermined Overhead Rate*Allocation Base)
Dec 31	Cost of Goods Sold	1550
Dec 31	Manufacturing Overhead		1550

Raw Material
Debit		Credit
Dec1	14000	Dec 5	1800
		Dec 15	2140
Ending	10060
Work in Process
Debit		Credit
Dec 5	1800	Dec 26	4920
Dec 10	120
Dec 15	2140
Dec 22	3000
Dec 31	60
Dec 31	1500
Ending	3700
Finished Goods
Debit		Credit
Dec 26	4920	Dec 28	4920
Ending
Manufacturing Overhead
Debit		Credit
Dec 10	5000	Dec 22	3000
Dec 16	900	Dec 31	1500
Dec 20	150	Dec 31	1550
Cost of Goods Sold
Debit		Credit
Dec 28	4920
Dec 31	1550

Job Cost Sheet for Job No 1
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date 12/5	1800
Date 12/10		6	20	120
Date 12/22					6	500	3000
Cost Summary			Units Shipped
Direct Material	1800		Date	No	Balance
Direct Labor	120
Manufacturing Overhead	3000
Total Product Cost	4920
Unit Product Cost	4920
Job Cost Sheet for Job No 2
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date 12/15	2140
Date 12/31		3	20	60
Date 12/31					3	500	1500
Cost Summary			Units Shipped
Direct Material	2140		Date	No	Balance
Direct Labor	60
Manufacturing Overhead	1500
Total Product Cost	3700
Unit Product Cost	3700

Cost of Goods Manufactured:
Finished goods inventory, beginning			0
Work in process inventory, beginning		0
Direct materials:
Direct materials inventory, beginning	0
Direct materials purchases	14000
Cost of direct materials available for use	14000
Direct materials inventory, ending	-10060
Cost of direct materials placed in production	3940
Direct labor	180
Factory overhead Applied	4500
Total manufacturing costs		8620
Total work in process during period		8620
Work in process inventory, ending		-3700
Cost of goods manufactured			4920
Underapplied/(overapplied overhead)			1550
Cost of finished goods available for sale			6470
Finished goods inventory, ending			0
Cost of goods sold			6470
Incme Statement:
Sales Revenue		19000
Less: Cost of Goods Sold:
COGS	6470
		6470
Gross Margin		12530
Less: Selling and Admin:
Salary	2000
Dep	600
Advertising	1400	4000
		8530

What is the ending balance for raw materials?	1006
What is the ending balance for work in process?	3700
What is the ending balance for finished goods?	0
What is the actual manufacturing overhead cost incurred during December before adjustment?	6050
What is the total applied manufacturing overhead cost during December before adjustment?	4500
What is the unadjusted cost of goods sold?	4920
Was the manufacturing overhead for the month of December overapplied/underapplied ?	Under Applied
What is the amount of Manufacturing overhead overapplied/underapplied?	1550
What is the adjusted cost of goods sold?	6470
What is gross margin?	12530	19000-6470
What is the total prime cost for Job#1?	1920	1800+120	RM+Labor
What is the total conversion cost for job #1?	3120	3000+120	Labor+Overheads
What is the total product cost for job#1?	4920	1800+3000+120	RM+Labor+Overheads
What was the period cost incurred for the month of December?	4000	2000+600+1400	Non Manufacturing
What is the total variable cost incurred for Job #1	1920	1800+120
What is the contribution margin for Job #1	17080	19000-1920
What would be the actual (not applied)	6000	12*500	Since only 12 hours availabe for the month