Bob and Beth Ford retired from the food service industry and began catering wedd
ID: 2664063 • Letter: B
Question
Bob and Beth Ford retired from the food service industry and began catering wedding receptions on a limited basis. The major costs in setting up their business included: linens, $2,100; two complete silver services, $1,500; glass plates and cups, $1,500; and cake-decorating tools and accessories, $900. 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 $200 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 $2,100 per year. All direct materials are purchased as a local grocery for cash, and Bob and Beth pay themselves an hourly wage of $37 per hour. During the month of June, Bob and Beth catered five weddings:Materials Labor Hours
Redfern wedding $510 28
Miller wedding $960 40
Walker wedding $552 21
DeSilva wedding $1,840 94
Estes wedding $790 32
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 nearest dollar.
Prepare job cost sheet for each of the five catering jobs:
Materials labor overhead Total
Redfern:
Miller:
Walker:
DeSilva:
Estes:
Calculate income for the month of June:
Explanation / Answer
Overhead pool is 1. Depreciation on equipment (2,100+1,500+1,500+900)/10= 600 2.Utilities 200*12= 2,400 3 Insurance 2,100 Total overhead pool 600+2,400+2,100= 5,100 5,100/1,000 est hours $5.10 hour Redfern 510 +28*37 +28*5.10= 1,689 Miller 960 +40*37 +40*5.10= 2,644 Walker 552 +21*37 +21*5.10= 1,436 De Silva 1,840+ 94*37 +94*5.10= 5,797 Estes 790 +32*37 +32*5.10= 2,137 Income is 20% of total costs (1,689+2,644+1,436+5,797+2,137)*.2= 2741