Question

QUESTION 1

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	$1,000.00
		Table Leg	$ 150.00
		Drawer	$ 300.00
	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	$ 2,500.00
	b.	Rent for the factory per month	$500.00
	c.	Depreciation of factory equipment per month	$600.00
		Total Estimated manufacturing overhead	$ 3,600.00
	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, $10,000.
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 $3,000.
	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 $500.
17-Dec	Advertising costs incurred but not paid for the month was $1,200.
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 $15,000 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= $3,520, Net operating income=$6,730
	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

Ending balance of raw materials	6500
Ending balanc or work in process	2860
Ending balance of finished goods	0
Actual manufacturing overhead cost incurred	3650
Applied overhead manufacturing costs	2700
Unadjusted cost of goods sold	3520
Underapplied manufacturing overhead cost	950
The adjusted cost of goods sold	4470
Gross margin	10530
Total prime cost for job #1	1720
The conversion cost for Job#1	1920
Total Product cost for Job#1	3520
Period cost for the month	3650
Total variable cost incurred for Job#1	1720
Contribution margin for Job#1	13280

THUNDERDUCK CUSTOM TABLE INC.
Journal Entries for the month of Dec.
Date	Account	Debit	Credit
Dec.1	Raw material	10000
	Accounts payable		10000
	(Purchase of raw material on account)
Dec.5	Work in process	1600
	Raw material		1600
	(Raw material for Job #1 issued - 1 table top and four legs)
Dec.10	Work in process	120
	Salaries & Wages Payable		120
	(Direct labour for Job#1 accounted - 3 employees , 2 hours each @$20 per hour)
	Manufacturing Overhead	3000
	Salaries & Wages	2000
	Salaries & Wages Payable		5000
	(Factory Supervisor & Administration salary accounted)
Dec.15	Work in process	1900
	Raw material		1900
	(Raw material for Job #2 issued - 1 table top , drawer and four legs)
Dec.16	Manufacturing Overhead	500
	Accounts payable		500
	(Rent for the month accounted)
Dec.17	Advertising expense	1200
	Accounts payable		1200
	(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	3520
	Work in process		3520
	(Job#1 completed transferred to Finished Goods)
Dec.26	Cost of goods sold	3520
	Finished Goods		3520
	(Cost of Job#1 Sold)
Dec.28	Accounts Receivable	15000
	Sales		15000
	(Sale of table under Job#1 accounted)
Dec.31	Work in process	60
	Salaries & Wages Payable		60
	(Direct labour for Job#2 3 employees 1 hour each @$20 per hour accounted)
Dec.31	Work in process	900
	Manufacturing Overhead		900
	(Manufacturing overhead for Job#2 3 hours @$300 per hour accounted)
Dec.31	Cost of goods sold	1250
	Manufacturing Overhead		1250
	(Under applied overhead transferred to COGS)

	Predetermined overhead rate:
	Estimated direct labour hours		12
	Estimated factory overhead costs:
	Factory supervisor salary		2500
	Rent for factory		500
	Depreciation for equipment		600
	Total		3600
	Predetermned rate	per hour	300
Raw Material
Dec.1	Accounts payable	10000	Dec.5	Work in process (Job.#1)	1600
			Dec.15	Work in process (Job#2)	1900
			Dec.31	Balance C/o	6500
		10000			10000
Accounts Payable
			Dec.1	Raw material	10000
			Dec.16	Manufacturing Overhead	500
			Dec.17	Advertising Expense	1200
Work in Process
Dec.5	Raw Material	1600	Dec.26	Finished goods	3520
Dec.10	Salaries & Wages Payable	120	Dec.31	Balance C/o	2860
Dec.15	Raw Material	1900
Dec.22	Manufacturing Overhead	1800
Dec.31	Salaries & Wages Payable	60
Dec.31	Manufacturing Overhead	900
		6380			6380
Manufacturing Overhead
Dec.10	Salaries & Wages Payable	3000	Dec.22	Work in process	1800
Dec.16	Accounts Payable	500	Dec.31	Work in process	900
Dec.20	Depreciation	150	dec.31	Cost of goods sold	950
		3650			3650
Cost of goods sold
Dec.26	Finished goods	3520	Dec.31	Income summary	4470
Dec.31	Manufacturing overhead	950
		4470			4470
Finished Goods
Dec.31	Work in process	3520	Dec.31	Cost of goods sold	3520
		3520			3520
Accounts Receivable
Dec.28	Sales	15000
Sales
			Dec.28	Accounts Receivable	15000
Salaries & Wages Expense
Dec.10	Salaries & Wages Payable	2000
Salaries & Wages Payable
			Dec.10	Work in process	120
			Dec.10	Manufacturing Overhead	3000
			Dec.10	Salaries & Wages Expense	2000
			Dec.31	Work in process	60
Advertising
Dec.17	Accounts Payable	1200
Depreciation
Dec.20	Accumulated Depreciation	750		Manufacturing overhead	150
Accumulated Depreciation
			Dec.20	Depreciation	750

COST SHEET                          JOB #1
Raw material		1600	Finished goods		3520
Wages		120
Manufacturing Overhead		1800
		3520			3520
JOB COST SHEET #2
Raw material		1900
Direct labor		60
Manufacturing Overhead		900

THUNDERDUCK CUSTOM TABLE INC.
Schedule of cost of goods manufactured
For the month ended December 31 , 20XX
DM purchases	10000
Less: Ending Raw nmaterial	6500
DM used	3500
DL	180
MOH applied	2700
Cost aded to WIP	6380
Less: WIP ennding	2860
COGMF	3520
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	3520
Available for sale	3520
Ending finished goods	0
CGS befre adjustment	3520
Add: Overhead adjustment	950
Adjusted COGS	4470
THUNDERDUCK CUSTOM TABLE INC.
Income statement
For the month ended December 31 , 20XX
Sales Revenue		15000
Less: COGS		4470
Gross Margin / Profit		10530
Less: Expenses:
Salaries and wages	2000
Advertising	1200
Depreciation	600
Total expenses		3800
Net operating income		6730