Question

In: Accounting

Larry’s Lawn Services provides custom landscaping for homes and businesses and uses job order costing to...

Larry’s Lawn Services provides custom landscaping for homes and businesses and uses job order costing to capture the cost of its landscaping jobs. There are no jobs in process at the beginning of May. Listed below are data concerning the three landscaping jobs conducted during May.

Southside Oceanview Rocky Heights

Direct materials $5,450 $7,635 $6,480

Landscaper labor costs $4,810 $5,980 $5,525

Landscaper hours 74 92 85

Overhead costs are applied to jobs on the basis of landscaper hours, and the predetermined overhead rate is $60 per landscaper hour. The Southside job is the only incomplete job at the end of May. Actual overhead for the month was $15,400.

Instructions

(a) Determine the cost of each job.

(b) Indicate the balance of the Landscape Contracts in Process account at the end of May.

(c) Calculate the ending balance of the Operating Overhead account for May.

(d) During May, Larry is approached by the owner of Mountain Estates who would like to contract with Larry’s company. Larry is working to prepare the bid for Mountain Estates and has the following information: Direct materials, $10,450 and Landscaper hours, 125 hours. Analyze the financial information provided for Southside, Oceanview and Rocky Heights and help Larry complete his bid by estimating the total cost of the Mountain Estates job.

CE 2-2

Pristine Painting Services uses a job order cost system to collect the costs of its home painting business. Each customer’s house is treated as a separate job. Overhead is applied to each job based on the number of painting hours required for each house. Listed below are the data for the current year:

Estimated overhead $780,000

Actual overhead $772,450

Estimated painting hours 39,000

Actual painting hours 38,750

The company uses Operating Overhead in place of Manufacturing Overhead.

Instructions

(a) Compute the predetermined overhead rate.

(b) Prepare the entry to apply the overhead for the year.

(c) Determine whether the overhead was under- or overapplied and by how much.

(d) If estimated overhead increases to $799,500, discuss how this would impact (1) applied overhead and (2) actual overhead. Support your discussion with calculations. Determine whether overhead would be under- or overapplied and by how much.

Expert Solution

a)
	Southside	Oceanview	Rocky Heights
Direct Material	$5,450.00	$7,635.00	$6,480.00
Landscaper labor costs	$4,810.00	$5,980.00	$5,525.00
Applied Overhead = Landscaper hours x $60 per hr.	$4,440.00	$5,520.00	$5,100.00
Total Cost	$14,700.00	$19,135.00	$17,105.00

b)
Balance in service contracts in process account	$14,700.00
The Southside job is the only incomplete job, therefore, $14,700.

c)
Actual overhead	$15,400.00	Dr
Applied Overhead (4440+5520+5100)	-$15,060.00	Cr.
Balance in operating overhead account(Overapplied)	$340.00	Dr

d)
Mountain Estates Bid
Estimated Costs
Direct Material	$10,450.00
Landscaper Labor Costs ($65 x 125 hours)	$8,125.00
Operating Overhead (125 hours x $60/hour	$7,500.00
Total Estimated Costs	$26,075.00
Working notes
Landscaper labor costs (a)	$4,810.00	$5,980.00	$5,525.00
Labour hours (b)	74	92	85
Cost per labour hour (a/b)	$65.00	$65.00	$65.00

ekkarill92 answered 1 year ago

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