Bob and Beth Ford retired from the food services industry and began catering wed
ID: 2428200 • Letter: B
Question
Bob and Beth Fordretired from the food services industry and began catering wedding receptions on a limited
basis. The major costs in setting up their business included: linens, $1,200; two complete silver
services, $1,000; glass plates and cups, $1,400; and cake-decorating tools and accessories,
$600. It is expected that all of these items will last 10 years with no salvage value. Bob and
Beth do all their food preparation in their apartment and have found that, in an average
month, their utility bill is $100 higher than when they did not cater. All baking and cooking
supplies are treated as “direct materials,” and the only other cost incurred is liability insurance
at $1,400 per year. All direct materials are purchased at a local grocery for cash, and Bob and
Beth pay themselves an hourly wage of $30 per hour.During the month of June, Bob and Beth
catered five weddings
Materials Labor Hours
Redfern wedding $ 400 25
Miller wedding 800 40
Walker wedding 500 20
DeSilva wedding 1,700 90
Estes wedding 600 30
The overhead allocation base is labor hours with an estimated 1,000 hours per year, and billings are
at 120 percent of job cost.Overhead allocations and markups are rounded to the nearest dollar.
Required
a. Prepare job cost sheets for each of the five catering jobs.
b. Calculate income for the month of June.
Explanation / Answer
Depreciation = Investment / 10 Linens = 1200 Silver Services = 1000 Glass Plates and Cups = 1400 Cake Decorating Tools = 600 Total Amount Invested = 4200 Annual Depreciation = 4200 / 10 = 420 Annual Utilities (100 * 12) = 1200 Total Overheads = 1620 Annual Estimated Hours = 1000 Overhead Rate per hour = 1620 / 1000 = 1.62 Labour Cost = Hours worked * 30 Overhead = Hours worked * 1.62 Job Material Labor Hours Labor Overhead Total Red Fem Wedding 400 25 750 40.5 815.5 Miller Wedding 800 40 1200 64.8 1304.8 Walker Wedding 500 20 600 32.4 652.4 De Silva Wedding 1700 90 2700 145.8 2935.8 Estes Wedding 600 30 900 48.6 978.6 Job Material Labor Hours Labor Overhead Total Red Fem Wedding 400 25 750 40.5 815.5 Miller Wedding 800 40 1200 64.8 1304.8 Walker Wedding 500 20 600 32.4 652.4 De Silva Wedding 1700 90 2700 145.8 2935.8 Estes Wedding 600 30 900 48.6 978.6Thank you..... Depreciation = Investment / 10 Linens = 1200 Silver Services = 1000 Glass Plates and Cups = 1400 Cake Decorating Tools = 600 Total Amount Invested = 4200 Annual Depreciation = 4200 / 10 = 420 Annual Utilities (100 * 12) = 1200 Total Overheads = 1620 Annual Estimated Hours = 1000 Overhead Rate per hour = 1620 / 1000 = 1.62 Labour Cost = Hours worked * 30 Overhead = Hours worked * 1.62