Question

This problem covers concepts that were presented in Chapters 11 and 12 concerning job-order costing systems. Barry Jackson’s Automotive Customizations, Inc. (BJAC), is a small shop dedicated to high-quality restorations of vintage cars. Although it will restore an automobile that a customer already owns, usually the shop buys an old vehicle, restores it, and then sells it in a private party sale or at a classic-car auction. The shop has been in existence for 10 years, but for the sake of simplicity, assume it has no beginning inventories for 2014. Five automobile restoration projects were worked on during 2014. By the end of the year, four of these projects were complete and three of them had been sold.
The following selected data are from BJAC’s 2014 budget:
Advertising ................... $ 8,000
Direct materials ................ 160,000
Direct labor ................... 140,000
Rent on office space .............. 7,000
Rent on factory space ............... 25,000
Indirect materials ............... 12,000
Maintenance costs for factory equipment ....... 4,000
Utilities costs for office space .......... 1,500
Utilities costs for factory space ........... 3,000
Depreciation on factory equipment ........ 10,000
Machine hours expected to be worked ........ 4,000
Direct labor hours expected to be worked ....... 6,500
The following information relates to production events during 2014:
■ Raw materials were purchased for $166,500.
■ Materials used in production totaled $161,000; $12,200 of these were considered indirect materials costs. The remaining $148,800 of direct materials costs related to individual restoration jobs as follows:
Job Number Direct Materials Cost
421 .......... $33,900
422 .......... 27,800
423 .......... 32,800
424 .......... 31,800
425 .......... 22,500
■ Labor costs incurred for production totaled $142,700. The workers are highly skilled craftsmen who require little supervision. Therefore, all of these costs were considered direct labor costs and related to individual restoration jobs as follows:
Job Number Direct Labor Cost
421 .......... $31,400
422 .......... 33,100
423 .......... 39,300
424 .......... 23,700
425 .......... 15,200
■ Paid factory rent of $22,000.
■ Recorded depreciation on factory equipment of $9,500.
■ Made $3,500 of payments to outside vendors for maintenance of factory equipment.
■ Paid factory utilities costs of $2,600.
■ Applied manufacturing overhead using a predetermined rate of $13.50 per machine hour.
The 3,750 machine hours that were used relate to each job as follows:
Job Number Machine Hours Worked
421 .......... 720
422 .......... 850
423 .......... 900
424 .......... 870
425 .......... 410
■ Completed all restoration jobs except Job 425 and transferred those projects to finished goods.
■ Sold three jobs for the following amounts:
Job Number Sales Price
421 .......... $100,900
422 .......... 96,100
423 .......... 90,800
■ Closed the Manufacturing Overhead account to transfer any overapplied or underapplied overhead to the Cost of Goods Sold account.

Required
a. Assume BJAC had used direct labor hours (versus machine hours) as its cost driver. Compute its predetermined overhead rate.
b. Determine the ending balance in Raw Materials Inventory.
c. Determine the ending balance in Finished Goods Inventory.
d. Determine the ending balance in Work in Process Inventory.
e. Determine the costs of goods manufactured.
f. Determine the amount of Cost of Goods Sold.
g. Determine the amount of gross margin that was earned on Jobs 421, 422, and 423.
h. Determine the amount of overapplied or underapplied overhead that existed at the end of the year.



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  • CreatedFebruary 07, 2014
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