ACCT 210 Lecture Notes - Lecture 2: Finished Good, Subledger, Investment Banking
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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 $2,436 to carpet the consulting firmâs newly leased office. The estimate was based on the following data:
| Estimated direct materials: | |
| 30 meters at $30 per meter | $ 900 |
| Estimated direct labor: | |
| 16 hours at $30 per hour | 480 |
| Estimated factory overhead (75% of direct labor cost) | 360 |
| Total estimated costs | $1,740 |
| Markup (40% of production costs) | 696 |
| Total estimate | $2,436 |
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 | 15 meters at $30 | $450 | |
| 114 | 19 meters at $30 | 570 | |
| Time Ticket No. | Description | Amount | |
| H10 | 8 hours at $30 | $240 | |
| H11 | 12 hours at $30 | 360 | |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
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| Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
| Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| 30 Meters at $30 | 16 Hours at $30 | 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 | 15 Meters at $30 | H10 | 8 Hours at $30 | Direct Materials | |||||||||||||||||||||||||||||||||||||||||||
| Direct Labor | |||||||||||||||||||||||||||||||||||||||||||||||
| 114 | 19 Meters at $30 | H11 | 12 Hours at $30 | Factory Overhead | |||||||||||||||||||||||||||||||||||||||||||
| Total | Total | Total Cost | |||||||||||||||||||||||||||||||||||||||||||||
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.)
a.)The direct materials cost exceeded the estimate by $120 because 4 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. The factory overhead cost exceeded the estimate because an additional $90 of factory overhead was allocated because of the increase in direct labor.
b.)Management didn't provide enough direction to complete tasks on budget.
c.)The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled.
d.) The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee.
All questions have to do with cost accounting systems,more in particular, process cost systems.
Complete each of the following statements by writing theappropriate words or amounts in the answers blanks.
1-5. Identify whether the process cost or job order cost systemwould be more appropriate for each of the followingbusinesses:
1. accounting firm 1. ____
2. breakfast cereal manufacturer 2. ____
3. ship construction 3. ____
4. pharmaceuticals company 4. ____
5. computer chip manufacturer 5. ____
6. The number of units that could have been completed within agiven accounting period with respect to direct materials andconversion costs is the 6. ____
7. Direct labor and factory overhead are referred to as 7.____
8â9. Oslo Manufacturing incurred $72,000 of direct materialscosts, direct labor costs of $24,500, and factory overhead of$20,500. If 1,000 direct materials equivalent units and 900conversion equivalent units were manufactured, then:
8. The equivalent unit cost for direct materials is 8. $____
9. The equivalent unit cost for conversion is 9. $____
10. The periodic report prepared for each processing department,summarizing (1) the units for which the department is responsibleand their disposition and (2) the costs charged the department andtheir allocation, is termed the 10. ____
11. The method of inventory costing that assumes the unitproduct costs should be determined separately for each period inthe order in which the costs were incurred is 11. ____
12â15. In a process cost system, the cost of goods completed andthe ending inventory valuation are determined by using thefollowing four steps:
12. ____
13. ____
14. ____
15. ____
16â17. The transferred costs of completed production inDepartment A using a process cost system include:
16. ____
17. ____
18â20. The three categories of units to be assigned cost for anaccounting period in a process cost system are:
18. ____
19. ____
20. ____
21â24. Department W had 8,000 units in work in process that were30% converted at the beginning of the period at a cost of $16,400.During the period, 15,000 units of direct materials were added at acost of $48,000, 16,000 units were completed, and 7,000 units were40% completed. The first-in, first-out cost method is used and allmaterials are added at the beginning of the process. Direct laborwas $30,000, and factory overhead was $54,000 during theperiod.
21. The number of equivalent units of conversion for the period was21. ____
22. The total conversion costs for the period were 22. $____
23. The conversion cost of the units started and completed duringthe period was 23. $____
24. The conversion cost of the 7,000 units in process at the end ofthe period was 24. $____
Indicate the titles of the accounts to be debited and creditedin recording the selected transactions given below by inserting theletter or letters of the account titles listed in the appropriatecolumns. (Do not record the amounts.)
ACCOUNTS
A. Accounts Payable E. FactoryOverheadâDepartment A I. Sales
B. Accounts Receivable F.Factory OverheadâDepartment B J. Wages Payable
C. Cash G. Finished GoodsK. Work in ProcessâDepartment A
D. Cost of Goods Sold H.Materials L. Work inProcessâDepartment B
TRANSACTIONS | Debit | Credit | ||
0. Paid cash for wages owed, $47,000............................................................. | J | 0. ____ | C | 0. ____ |
1-2. Materials requisitioned for use in Department A,$36,000, of which $31,500 entered directly into the product..................................................... |
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3-4. Labor in Department A, $13,000, was used directlyin the manufacture of the product..................................................................................................... |
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5-6. Factory overhead applied to production inDepartment A, $6 per machine hour..................................................................................................... |
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| 7-8. Goods finished in Department A and transferred toDepartment B, $79,000............................................................................................................... |
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9-10. Goodsfinished in Department B and transferred to finished goods,$114,000............................................................................................................. |
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11-12. Cost of finishedgoods sold, $126,374......................................................... | 11. ____ | 12. ____ |
