Bob and Beth Ford retired from the food service industry and began catering wedd
ID: 2664065 • 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
Calculation of Predetermined Over Head Rate Over Heads : Depreciation Amount Invested / 10 Linens 2100 Silver Services 1500 Glass Plates and Cups 1500 Cake Decorating Tools 900 Total Amount Invested 6000 Annual Depreciation 6,000 / 10 600 Annual Utilities(200 *12) 2400 Total OverHeads 3000 Annual Estimated Hours 1000 Over Head Rate 3,000 /1,000 $3per hour Labor Cost Hours worked *37 Overhead Hours worked *3 Job Material Labor Over Head Total Red Fern Wedding 510 1036 84 1630 Miller Wedding 960 1480 120 2560 Walker Wedding 552 777 63 1392 De Silva Wedding 1840 3478 282 5600 Estes Wedding 790 864 96 1750 Cost Of Job Revenue Job Income (Cost of Job *1.2) Red Fern Wedding 1630 1956 326 Miller Wedding 2560 3072 512 Walker Wedding 1392 1670.4 278.4 De Silva Wedding 5600 6720 1120 Estes Wedding 1750 2100 350 Net Income 12932 15518.4 2586.4