Priya Allen is an owner, operator of the online fashion boutique, Evening Gowns by Priya (EGP),...

 

Transcribed Image Text:

Priya Allen is an owner, operator of the online fashion boutique, Evening Gowns by Priya (EGP), which creates custom made-to-order evening gowns. Her gowns feature premium fabrics and notions and require substantial amounts of hand-sewing. Currently Priya rents commercial space to produce her product and employs 3 fulltime employees. 2 of the employees work exclusively to make the evening gowns, while the 3rd employee handles the administration needs, sales, marketing, and customer service needs for the company. Priya tracks all costs using Job Costing, allocating manufacturing overhead costs on a monthly basis at a rate of 60% of direct labor costs. At the beginning of November 2019, EGP had the following assets on the books: 1. Raw Material Inventory 2. Work-in-process inventory 3. Finished Goods inventory $1,500 $5,380 $ 4. Cash and all other assets $4,000 EGP had no outstanding debts on 11/1/19. On 11/1/19 there were three jobs that were in work-in-process with the following costs Direct Labor $1,400 $ 600 $ 300 $2,300 Applied MOH $840 $360 Job Direct Materials $ 800 $ 300 $ 600 $1,700 1180 1181 $180 $1,380 1182 Total During November Jobs 1180, 1181, 1182, and 1183 were completed. Jobs 1184 and 1185 were started but not completed in November. During November, the following direct materials and direct labor costs were incurred: Job Direct Materials Direct Labor $ 100 $ 300 $ 200 $ 500 $ 200 $ 300 $1,600 $ 400 $ 500 $ 700 $ 1,300 $ 300 $ 500 $3,700 1180 1181 1182 1183 1184 1185 Total Other important financial factors in November: 1. Total Raw Material purchases for the month were $1,000. 2. Maintenance costs for the sewing machines were $400. 3. Rent for the factory was $1,500. 4. Utility and Insurance payments for the factory were $450. 5. General and Administrative expenses totaled $3,000. 6. Cash received from customers for Jobs 1180, 1181, 1182, and 1183 were $4,600, $3,500, $4,000, and $3,200 respectively for a total of $15,300. 7. At the end of the month, EGP had no outstanding debts. During the month of November, Priya was contacted by Ms. Ronald, a potential customer wanting an intricate gown. Priya estimated the cost for this particular job as follows: $ 500 $1,200 $ 720 $2,420 Materials Cost: Direct Labor Costs: Overhead: Total Cost: Upon receiving the quoted price of $2,900 ($2,420 cost plus $480 profit), Ms. Ronald was outraged claiming that she could purchase the identical custom gown for $2,000 from a local competitor. Priya wondered how anyone could stay in business charging only $2,000 for a gown that cost her $2,420 to make. Assignment (Complete in the Excel Spreadsheet that accompanies this assignment) 1. Use the Job Sheet to record all costs allocated to each job started, in-process, and completed in November. 2. Record all transactions that occur in November using journal entries and then posting to T- accounts 3. Prepare the Balance Sheet as of November 31, 2019 4. Prepare the Income Statement for the month of November (ignore taxes). 5. Explain Priya's reasoning for refusing to make and sell the gown to Ms. Ronald. Under what circumstances should Priya consider selling the gown to Ms. Ronald for $2,000? Priya Allen is an owner, operator of the online fashion boutique, Evening Gowns by Priya (EGP), which creates custom made-to-order evening gowns. Her gowns feature premium fabrics and notions and require substantial amounts of hand-sewing. Currently Priya rents commercial space to produce her product and employs 3 fulltime employees. 2 of the employees work exclusively to make the evening gowns, while the 3rd employee handles the administration needs, sales, marketing, and customer service needs for the company. Priya tracks all costs using Job Costing, allocating manufacturing overhead costs on a monthly basis at a rate of 60% of direct labor costs. At the beginning of November 2019, EGP had the following assets on the books: 1. Raw Material Inventory 2. Work-in-process inventory 3. Finished Goods inventory $1,500 $5,380 $ 4. Cash and all other assets $4,000 EGP had no outstanding debts on 11/1/19. On 11/1/19 there were three jobs that were in work-in-process with the following costs Direct Labor $1,400 $ 600 $ 300 $2,300 Applied MOH $840 $360 Job Direct Materials $ 800 $ 300 $ 600 $1,700 1180 1181 $180 $1,380 1182 Total During November Jobs 1180, 1181, 1182, and 1183 were completed. Jobs 1184 and 1185 were started but not completed in November. During November, the following direct materials and direct labor costs were incurred: Job Direct Materials Direct Labor $ 100 $ 300 $ 200 $ 500 $ 200 $ 300 $1,600 $ 400 $ 500 $ 700 $ 1,300 $ 300 $ 500 $3,700 1180 1181 1182 1183 1184 1185 Total Other important financial factors in November: 1. Total Raw Material purchases for the month were $1,000. 2. Maintenance costs for the sewing machines were $400. 3. Rent for the factory was $1,500. 4. Utility and Insurance payments for the factory were $450. 5. General and Administrative expenses totaled $3,000. 6. Cash received from customers for Jobs 1180, 1181, 1182, and 1183 were $4,600, $3,500, $4,000, and $3,200 respectively for a total of $15,300. 7. At the end of the month, EGP had no outstanding debts. During the month of November, Priya was contacted by Ms. Ronald, a potential customer wanting an intricate gown. Priya estimated the cost for this particular job as follows: $ 500 $1,200 $ 720 $2,420 Materials Cost: Direct Labor Costs: Overhead: Total Cost: Upon receiving the quoted price of $2,900 ($2,420 cost plus $480 profit), Ms. Ronald was outraged claiming that she could purchase the identical custom gown for $2,000 from a local competitor. Priya wondered how anyone could stay in business charging only $2,000 for a gown that cost her $2,420 to make. Assignment (Complete in the Excel Spreadsheet that accompanies this assignment) 1. Use the Job Sheet to record all costs allocated to each job started, in-process, and completed in November. 2. Record all transactions that occur in November using journal entries and then posting to T- accounts 3. Prepare the Balance Sheet as of November 31, 2019 4. Prepare the Income Statement for the month of November (ignore taxes). 5. Explain Priya's reasoning for refusing to make and sell the gown to Ms. Ronald. Under what circumstances should Priya consider selling the gown to Ms. Ronald for $2,000?

Answer rating: 100% (QA)

Note 1 All monetory figures in 1 following is the summary of Job completed and started in the month ... View the full answer