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	$1,100.00
		Table Leg	$200.00
		Drawer	$310.00
	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, $11,000.
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, $25 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 $1,400.
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 $16,000 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, $25 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= $4,150, Net operating income=$6,750
	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

THUNDERDUCK CUSTOM TABLE INC.
Journal Entries for the month of Dec.
Date	Account	Debit	Credit
Dec.1	Raw material	11000
	Accounts payable		11000
	(Purchase of raw material on account)
Dec.5	Work in process	1300
	Raw material		1300
	(Raw material for Job #1 issued - 1 table top and four legs)
Dec.10	Work in process	150
	Salaries & Wages Payable		150
	(Direct labour for Job#1 accounted - 3 employees , 2 hours each @$25 per hour)
	Manufacturing Overhead	3500
	Salaries & Wages	2000
	Salaries & Wages Payable		5500
	(Factory Supervisor & Administration salary accounted)
Dec.15	Work in process	1610
	Raw material		1610
	(Raw material for Job #2 issued - 1 table top , drawer and four legs)
Dec.16	Manufacturing Overhead	600
	Accounts payable		600
	(Rent for the month accounted)
Dec.17	Advertising expense	1400
	Accounts payable		1400
	(Adevertising expense accounted)
Dec.20	Depreciation	750
	Accumulated Depreciation		750
	(Depreciation for the month accounted)
	Manufacturing Overhead	150
	Depreciation		150
	(Depreciation on factory equipment)
Dec.22	Work in process	1800
	Manufacturing Overhead		1800
	(Manufacturing overhead for Job#1 - 6 hours @$300 per hour   accounted)
Dec.26	Finished Goods	3550
	Work in process		3550
	(Job#1 completed transferred to Finished Goods)
Dec.26	Cost of goods sold	3550
	Finished Goods		3550
	(Cost of Job#1 Sold)
Dec.28	Accounts Receivable	16000
	Sales		16000
	(Sale of table under Job#1 accounted)
Dec.31	Work in process	75
	Salaries & Wages Payable		75
	(Direct labour for Job#2 3 employees 1 hour each @$25 per hour accounted)
Dec.31	Work in process	1050
	Manufacturing Overhead		1050
	(Manufacturing overhead for Job#2 3 hours @$350 per hour accounted)
Dec.31	Cost of goods sold	1100
	Manufacturing Overhead		1100
	(Under applied overhead transferred to COGS)

COST SHEET                          JOB #1
Raw material		1300	Finished goods		3550
Wages		150
Manufacturing Overhead		2100
		3550			3550
JOB COST SHEET #2
Raw material		1610
Direct labor		75
Manufacturing Overhead		1050
	Predetermined overhead rate:
	Estimated direct labour hours		12
	Estimated factory overhead costs:
	Factory supervisor salary		3000
	Rent for factory		600
	Depreciation for equipment		600
	Total		4200
	Predetermned rate	per hour	350
Raw Material
Dec.1	Accounts payable	11000	Dec.5	Work in process (Job.#1)	1300
			Dec.15	Work in process (Job#2)	1610
			Dec.31	Balance C/o	8090
		11000			11000
Accounts Payable
			Dec.1	Raw material	11000
			Dec.16	Manufacturing Overhead	600
			Dec.17	Advertising Expense	1400
Work in Process
Dec.5	Raw Material	1300	Dec.26	Finished goods	3550
Dec.10	Salaries & Wages Payable	150	Dec.31	Balance C/o	2735
Dec.15	Raw Material	1610
Dec.22	Manufacturing Overhead	2100
Dec.31	Salaries & Wages Payable	75
Dec.31	Manufacturing Overhead	1050
		6285			6285
Manufacturing Overhead
Dec.10	Salaries & Wages Payable	3500	Dec.22	Work in process	2100
Dec.16	Accounts Payable	600	Dec.31	Work in process	1050
Dec.20	Depreciation	150	dec.31	Cost of goods sold	1100
		4250			4250
Cost of goods sold
Dec.26	Finished goods	3550	Dec.31	Income summary	4650
Dec.31	Manufacturing overhead	1100
		4650			4650
Finished Goods
Dec.31	Work in process	3550	Dec.31	Cost of goods sold	3550
		3550			3550
Accounts Receivable
Dec.28	Sales	16000
Sales
			Dec.28	Accounts Receivable	16000
Salaries & Wages Expense
Dec.10	Salaries & Wages Payable	2000
Salaries & Wages Payable
			Dec.10	Work in process	150
			Dec.10	Manufacturing Overhead	3500
			Dec.10	Salaries & Wages Expense	2000
			Dec.31	Work in process	75
Advertising
Dec.17	Accounts Payable	1400
Depreciation
Dec.20	Accumulated Depreciation	750		Manufacturing overhead	150
Accumulated Depreciation
			Dec.20	Depreciation	750

THUNDERDUCK CUSTOM TABLE INC.
Schedule of cost of goods manufactured
For the month ended December 31 , 20XX
DM purchases	11000
Less: Ending Raw nmaterial	8090
DM used	2910
DL	225
MOH applied	3150
Cost aded to WIP	6285
Less: WIP ennding	2735
COGMF	3550
THUNDERDUCK CUSTOM TABLE INC.
Schedule of cost of goods sold
For the month ended December 31 , 20XX
Beg. Finished goods	0
Cost of goods manufactured	3550
Available for sale	3550
Ending finished goods	0
CGS befre adjustment	3550
Add: Overhead adjustment	1100
Adjusted COGS	4650
THUNDERDUCK CUSTOM TABLE INC.
Income statement
For the month ended December 31 , 20XX
Sales Revenue		16000
Less: COGS		4650
Gross Margin / Profit		11350
Less: Expenses:
Salaries and wages	2000
Advertising	1400
Depreciation	600
Total expenses		4000
Net operating income		7350

Ending balance of raw materials	8090
Ending balanc or work in process	2735
Ending balance of finished goods	0
Actual manufacturing overhead cost incurred	4250
Applied overhead manufacturing costs	3150
Unadjusted cost of goods sold	3550
Underapplied manufacturing overhead cost	1100
The adjusted cost of goods sold	4650
Gross margin	10350
Total prime cost for job #1	1450
The conversion cost for Job#1	2250
Total Product cost for Job#1	3550
Period cost for the month	8250
Total variable cost incurred for Job#1	1450
Contribution margin for Job#1	14550
Actual cost for 5 tables	9350
Direct material    - 5 x 1300   - 6,500
Direct labor - 5 x 6 x 25        -     750
Overhead                                     - 2,100