ACCT-241 Chapter Notes - Chapter 3: Direct Labor Cost, Barcode, Cost Driver
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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 firm’s 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 | |||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||
| 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.
Remnant Carpet Companysells and installs commercial carpeting for office buildings.Remnant Carpet Company uses a job order cost system. When aprospective customer asks for a price quote on a job, the estimatedcost data are inserted on an unnumbered job cost sheet. If theoffer is accepted, a number is assigned to the job and the costsincurred are recorded in the usual manner on the job cost sheet.After the job is completed, reasons for the variances between theestimated and actual costs are noted on the sheet. The data arethen available to management in evaluating the efficiency ofoperations and in preparing quotes on future jobs. On October 1,Remnant Carpet Company gave Jackson Consulting an estimate of $$3,430 to carpet the consulting firm’s newly leased office. Theestimate was based on the following data:
| Estimated direct materials: | |
| 40 sq. ft. at $35 per sq. ft. | $ 1,400 |
| Estimated direct labor: | |
| 20 hours at $30 per hour | 600 |
| Estimated factory overhead (75% of direct labor cost) | 450 |
| Total estimated costs | $2,450 |
| Markup (40% of production costs) | 980 |
| Total estimate | $3,430 |
On October 3, JacksonConsulting signed a purchase contract, and the delivery andinstallation was completed on October 10.
The related materialsrequisitions and time tickets are summarized as follows:
| Materials Requisition No. | Description | Amount | |
| 112 | 20 sq. ft. at $35 | $700 | |
| 114 | 24 sq. ft. at $35 | 840 | |
| Time Ticket No. | Description | Amount | |
| H10 | 10 hours at $30 | $300 | |
| H11 | 14 hours at $30 | 420 | |
Required:
Enter amounts aspositive numbers.
1.Complete that portion of the job order cost sheet that would beprepared when the estimate is given to the customer.
2. Record the costs incurred, and complete thejob order cost sheet.
| JOB ORDER COST SHEET | |||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||
| Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
| Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| 40 sq. ft. at $35 | 20 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 | ||||||||||||||||||||||||||||||||||||||||
| 310 | 20 sq. ft. at $35 | H10 | 10 Hours at $30 | Direct Materials | |||||||||||||||||||||||||||||||||||||||||||
| Direct Labor | |||||||||||||||||||||||||||||||||||||||||||||||
| 312 | 24 sq. ft. at $35 | H11 | 14 Hours at $30 | Factory Overhead | |||||||||||||||||||||||||||||||||||||||||||
| Total | Total | Total Cost | |||||||||||||||||||||||||||||||||||||||||||||
Feedback
What is the best explanation for the variances between actualcosts and estimated costs. (For this purpose, assume that 4 squarefeet of materials were spoiled, the factory overhead rate has beenproved to be satisfactory, and an inexperienced employee performedthe work.)
The direct materials cost exceeded the estimate by $140 because4 square feet of materials were spoiled. The direct labor costexceeded the estimate by $120 because an additional 4 hours oflabor were used by an inexperienced employee. The factory overheadcost exceeded the estimate because an additional $90 of factoryoverhead was allocated because of the increase in direct labor.
Management didn't provide enough direction to complete tasks onbudget.
The direct materials cost exceeded the estimate by $105 because3 square feet of materials were spoiled.
The direct labor cost exceeded the estimate by $360 because anadditional 4 hours of labor were used by an inexperiencedemployee.
Select the correct answer from the above choices.
Remnant Carpet Company sells and installs commercial carpetingfor office buildings. Remnant Carpet Company uses a job order costsystem. When a prospective customer asks for a price quote on ajob, the estimated cost data are inserted on an unnumbered job costsheet. If the offer is accepted, a number is assigned to the job,and the costs incurred are recorded in the usual manner on the jobcost sheet. After the job is completed, reasons for the variancesbetween the estimated and actual costs are noted on the sheet. Thedata are then available to management in evaluating the efficiencyof operations and in preparing quotes on future jobs. On October 1,Remnant Carpet Company gave Jackson Consulting an estimate of$3,850 to carpet the consulting firm’s newly leased office. Theestimate was based on the following data:
| Estimated direct materials: | |
| 40 meters at $32 per meter | $ 1,280 |
| Estimated direct labor: | |
| 28 hours at $30 per hour | 840 |
| Estimated factory overhead (75% of direct labor cost) | 630 |
| Total estimated costs | $2,750 |
| Markup (40% of production costs) | 1,100 |
| Total estimate | $3,850 |
On October 3, Jackson Consulting signed a purchase contract, andthe delivery and installation were completed on October 10.
The related materials requisitions and time tickets aresummarized as follows:
| Materials Requisition No. | Description | Amount | |
| 112 | 20 meters at $32 | $640 | |
| 114 | 24 meters at $32 | 768 | |
| Time Ticket No. | Description | Amount | |
| H10 | 14 hours at $30 | $420 | |
| H11 | 18 hours at $30 | 540 | |
Required:
Enter amounts as positive numbers.
1. Complete that portion of the job order costsheet that would be prepared when the estimate is given to thecustomer.
2. Record the costs incurred, and complete thejob order cost sheet.
| JOB ORDER COST SHEET | |||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||
| Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
| Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| 40 Meters at $32 | $ | 28 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 | 20 Meters at $32 | $ | H10 | 14 Hours at $30 | $ | Direct Materials | $ | ||||||||||||||||||||||||||||||||||||||||
| Direct Labor | |||||||||||||||||||||||||||||||||||||||||||||||
| 114 | 24 Meters at $32 | H11 | 18 Hours at $30 | Factory Overhead | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | Total | $ | Total Cost | $ | ||||||||||||||||||||||||||||||||||||||||||
What is the best explanation for the variances between actualcosts and estimated costs. (For this purpose, assume that theadditional meters of material used in the job were spoiled, thefactory overhead rate has proven to be satisfactory, and aninexperienced employee performed the work.)
The direct materials cost exceeded the estimate by $128 because4 meters of materials were spoiled. The direct labor cost exceededthe estimate by $120 because an additional 4 hours of labor wereused by an inexperienced employee. The factory overhead costexceeded the estimate because an additional $90 of factory overheadwas allocated because of the increase in direct labor.
Management didn't provide enough direction to complete tasks onbudget.
The direct materials cost exceeded the estimate by $75 because 3meters of materials were spoiled.
The direct labor cost exceeded the estimate by $120 because anadditional 4 hours of labor were used by an inexperiencedemployee.
Select the correct answer from the above choices.
