Remnant Carpet Company sells and installs commercial carpeting for office buildi
ID: 2397475 • Letter: R
Question
Remnant Carpet Company sells and installs commercial carpeting for office buildings. Remnant Carpet Company uses a 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 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 $ $3,430 to carpet the consulting firm’s newly leased office. The estimate was based on the following data:
On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation was completed on October 10.
The related materials requisitions and time tickets are summarized as follows:
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.
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What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that 4 square feet of materials were spoiled, the factory overhead rate has been proved to be satisfactory, and an inexperienced employee performed the work.)
The direct materials cost exceeded the estimate by $140 because 4 square feet 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.
Management didn't provide enough direction to complete tasks on budget.
The direct materials cost exceeded the estimate by $105 because 3 square feet of materials were spoiled.
The direct labor cost exceeded the estimate by $360 because an additional 4 hours of labor were used by an inexperienced employee.
Select the correct answer from the above choices.
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 $3,430Explanation / Answer
The direct materials cost exceeded the estimate by $140 because 4 square feet 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.
JOB ORDER COST SHEET ESTIMATE Direct Materials Direct Labor Summary Amount Amount Amount 40 sq. ft. at $35 1400 20 Hours at $30 600 Direct Materials 1400 Direct Labor 600 Factory Overhead 450 Total 1400 600 Total cost 2450 ACTUAL Direct Materials Direct Labor Summary Mat. Req. No. Description Amount Time Ticket No. Description Amount Item Amount 112 20 sq. ft. at $35 700 H10 10 Hours at $30 300 Direct Materials 1540 114 24 sq. ft. at $35 840 H11 14 Hours at $30 420 Direct Labor 720 Factory Overhead 540 Total 1540 Total 720 Total cost 2800