You work for Thunderduck Custom Tables Inc. This is the first month of operation

Question

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 Step 1 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 Table Leg Drawer $1,400.00 $400.00 $340.00 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 b Rent for the factory per month c. Depreciation of factory equipment per month $4,500.00 $900.00 $600.00 S6,000.00 Total Estimated manufacturing overhead What is the predetermined manufacturing overhead rate? Step 2 Step 3 The first order you received was to manufacture a table using a table top and four legs. This is your Job #1 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

Explanation / Answer

Predetermined manufacturing overhead rate=Total estimated manufacturing overhead/Total estimated direct labor hours=6000/12=$500 per direct labor hour General Journal Date Description Debit Credit Dec 1. Raw materials 14000 Accounts payable 14000 (Raw material purchased on account) Dec 5. Work in process 1400+(4*400) 3000 Raw materials 3000 (Materials applied to Job #1) Dec 10. Work in process (3*2*20) 120 Manufacturing overhead 5000 Salaries and Wages expense 2000 Salaries and Wages payable 7120 (Employee costs incurred) Dec 15. Work in process 1400+(4*400)+340 3340 Raw materials 3340 (Materials applied to Job #2) Dec 16. Manufacturing overhead 900 Accounts payable 900 (Rent for the factory building) Dec 17. Advertising expenses 900 Accounts payable 900 (Advertising cost incurred) Dec 20. Manufacturing overhead 150 Depreciation expense 600 Accumulated depreciation 750 Dec 22. Work in process (3*2*500) 3000 Manufacturing overhead 3000 (Manufcturing overhead cost applied) Dec 26. Finished goods 6120 Work in process 6120 (Check Job cost sheet of Job #1) (Job #1 completed and transferred to Finished goods) Dec 28. Accounts receivables 19000 Sales revenue 19000 (Job #1 sold on account) Cost of goods sold 6120 Finished goods 6120 (Cost of goods sold accounted) Dec 31. Work in process (3*20) 60 Salaries and Wages payable 60 (Direct labor cost incurred) Dec 31. Work in process (3*500) 1500 Manufacturing overhead 1500 (Manufcturing overhead cost applied) Dec 31. Cost of goods sold (See note below) 1550 Manufacturing overhead 1550 Note: Under applied or over applied overhead: Total manufacturing overhead incurred: Salary supervisor for the factory 5000 Rent for factory building 900 Depreciation on factory equipment 150 Total manufacturing overhead incurred 6050 Total manufacturing overhead applied: Job #1 3000 Job #2 1500 Total manufacturing overhead applied 4500 Since the manufacturing overhead applied is less than the cost of manufaturing overhead incurred,Under application of overhead has incurred. under-applied overhead=6050-4500=$ 1550 Job cost sheet Job Number:1 Date initiated: Dec 1. Item:Table top and Table Leg Date completed: Dec 26. Direct materials Direct labor Manufacturing overhead Amount Hours Rate Amount Hours Rate Amount 3000 6 20 120 6 500 3000 Cost summary Direct materials 3000 Direct labor 120 Manufacturing overhead 3000 Total product cost 6120 Job cost sheet Job Number:2 Date initiated: Dec 1. Item:Table top,Table Leg and Drawer Date completed: NA Direct materials Direct labor Manufacturing overhead Amount Hours Rate Amount Hours Rate Amount 3340 3 20 60 3 500 1500 Cost summary Direct materials 3340 Direct labor 60 Manufacturing overhead 1500 Total product cost 4900

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