Job Costing Project

In this assignment you will be required to complete tasks related to job costing. Download the document, complete the required information, save the document, and submit the assignment in Blackboard.

Custom Fabric Ventures is a small company that produces fabric-based wardrobe accessories (such as, handbags, scarves, and headbands) and home accessories (such as placemats, pillows, and window treatments). The company keeps a limited number of popular items in stock, but primarily produces custom orders. Customers are able to choose from a wide selection of styles, sizes, and fabrics for each type of product. Most of the companys customers are small boutiques, home dcor shops, and home-decorators who serve clientele with discerning tastes. As a result, customers expect high-quality products.

The sales staff of Custom Fabric Ventures has just received the following order:

Custom Fabric Ventures

Customer Order Form

Customer: Katies Boutique

Order Date: 10/2/2012

Order Due Date: 10/15/2012

Description	Model number	Quantity	Unit Sales price	Total
Black & white handbag	BW1493	7	$75	$525

Due to its popularity, the Black and White Handbag (BW14293) is normally a stock item. However, the handbag is currently out of stock. Rather than producing only enough units to fill Katies order, management would like to produce a job (Job 114) that is large enough to fill Katies order and replenish stock. The fabric used for this job can be stacked four layers deep for cutting, while still maintaining the quality and precision of the cut. Therefore, the company is able to realize some economies of scale by producing the handbags in multiples of 4. Management would like to produce enough units in this job to have a minimum of 30 and a maximum of 35 handbags left in stock after Katies order has been filled.

Your primary task is to determine the cost of producing Job 114 so that you can calculate the gross profit on the sale to Katies Boutique. As part of this process, you will be required to schedule production, purchase any raw materials that are not currently in stock, requisition materials for the job, and complete the job cost record.

The following step-by-step requirements will guide you through the entire job costing process. The documents you will encounter in this case are normally completed electronically rather than manually. In addition, these documents often interface with each other electronically in order to transfer data in real-time, eliminate tedious calculations, and prevent errors. However, the underlying process is the same regardless of whether the company uses electronic or manual documents.

Req. 20: The handbags ordered by Katies Boutique are shipped out on 10/14. Update the job cost record. What is the new balance in Finished Goods Inventory for this item? ___________________

See Excel file: Job Cost Record

Req. 21: Calculate the gross profit on the sale to Katies Boutique:

Req. 22: Assume for a moment that Katies Boutique has found an overseas manufacturer that would charge $45 per unit for the same handbag. Should Custom Fabric Ventures match the price of this competitor? Briefly explain your answer.

Req. 23: Would the cost of Job 114, as reported on the job cost record, have been different had the company used LIFO or Weighted Average, rather than FIFO, as its inventory flow assumption? If so, would it have been higher or lower than currently reported? ______Explain.

Req. 24: Would the cost of Job 114, as reported on the job cost record, have been different had the company used direct labor cost as the MOH allocation base, rather than direct labor hours?_____ If so, by how much would the total job cost have differed?_______

Req. 25: Would the cost of Job 114, as reported on the job cost record, have been different had the companys production equipment been 6 years old, rather than 3 years old? If so, by how much would the total job cost have differed? ________

Req. 26: The budgeted data for the year did not include employment benefits, such as paid time off, company-paid health insurance, or company-sponsored retirement plans. From an accounting standpoint, how should these costs be treated if they relate to selling and administrative personnel? ______________________________ How should they be treated if they relate to plant personnel? ______________________________Through what two mechanisms might these costs be assigned to jobs if they relate to employees working in the plant?

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Req. 27: As a manager, you always need to be thinking about how to decrease costs without sacrificing the quality of your products and services. Generate three to five specific ideas this company could possibly implement for decreasing costs on similar jobs in the future. Note: General answers such as spend less on labor or be more efficient will not count. You must generate specific, realistic and actionable recommendations managers could take to possibly decrease production costs related to similar jobs in the future. Req. 28: Record the following journal entries associated with this case:

Record the purchases of raw materials.

Record the use of direct materials on Job 114.

Record the use of direct labor on Job 114.

Record the allocation of manufacturing overhead to Job 114.

Record the completion of Job 114 and its movement out of the factory.

Record the sale of 7 units from Job 114 to Katies Boutique. Use a perpetual system.

Record indirect labor which totaled $3,500 for the month.

Record the use of indirect materials which totaled $1,500 for the month.

Assume the total amount of MOH incurred during the month was $25,450 and the total amount allocated to jobs during the month was $28,934. Was manufacturing overhead over or under allocated? __________________________ Record the journal entry to close the manufacturing overhead (MOH) account assuming the company closes MOH to Cost of Goods Sold (CGS).