Question

Job Order Cost Sheet

Remnant Carpet Company sells and installs commercial carpeting for office buildings. Remnant Carpet Company uses a A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product that passes through the factory.job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered An account in the work in process subsidiary ledger in which the costs charged to a particular job order are recorded.job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On October 1, Remnant Carpet Company gave Jackson Consulting an estimate of $9,450 to carpet the consulting firm’s newly leased office. The estimate was based on the following data:

Estimated direct materials:
200 meters at $35 per meter	$7,000
Estimated direct labor:
16 hours at $20 per hour	320
Estimated factory overhead (75% of direct labor cost)	240
Total estimated costs	$7,560
Markup (25% of production costs)	1,890
Total estimate	$9,450

On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation were completed on October 10.

The related The form or electronic transmission used by a manufacturing department to authorize materials issuances from the storeroom.materials requisitions and The form on which the amount of time spent by each employee and the labor cost incurred for each individual job, or for factory overhead, are recorded.time tickets are summarized as follows:

Materials Requisition No.	Description	Amount
112	140 meters at $35	$4,900
114	68 meters at $35	2,380

Time Ticket No.	Description	Amount
H10	10 hours at $20	$200
H11	10 hours at $20	200

Required:

Enter amounts as positive numbers.

1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer.

2. Record the costs incurred, and complete the job order cost sheet.

JOB ORDER COST SHEET
Customer Jackson Consulting Date October 1 Date wanted October 10 Date completed October 10 Job. No. ESTIMATE
Direct Materials			Direct Labor			Summary
		Amount			Amount		Amount
200 Meters at $35		$	16 Hours at $20		$	Direct Materials	$
						Direct Labor
						Factory Overhead
Total		$	Total		$	Total cost	$
ACTUAL
Direct Materials			Direct Labor			Summary
Mat. Req. No.	Description	Amount	Time Ticket No.	Description	Amount	Item	Amount
112	140 Meters at $35	$	H10	10 Hours at $20	$	Direct Materials	$
						Direct Labor
114	68 Meters at $35		H11	10 Hours at $20		Factory Overhead
Total		$	Total		$	Total Cost	$

Feedback

What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that the additional meters of material used in the job were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work.)

The direct materials cost exceeded the estimate by $280 because 8 meters of materials were spoiled. The direct labor cost exceeded the estimate by $80 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $60 of factory overhead was allocated because of the increase in direct labor.

Management didn't provide enough direction to complete tasks on budget.

The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled.

The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee.

Select the correct answer from the above choices.

a

b

c

d

Answer 1

The best explanation for variance between the estimated and actual cost is option a

Extra usage of material on account of spoilage is (208-200)=8 meters=$280

Extra hours by direct labour on account of inexperienced labour=4 hours @ $20/hour= $80

Since, overhead is absoprbed at 75% of direct labour, overhad shoot up by 75% of $80= $60 due to $80 increase in direct labor costs