HRES 2170 Lecture Notes - Lecture 4: Job Analysis, Performance Management, Specific Performance
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Remnant Carpet Company sells and installs commercial carpeting for office buildings. Remnant Carpet Company uses a A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product that passes through the factory.job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered An account in the work in process subsidiary ledger in which the costs charged to a particular job order are recorded.job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On October 1, Remnant Carpet Company gave Jackson Consulting an estimate of $2,436 to carpet the consulting firm’s newly leased office. The estimate was based on the following data:
| Estimated direct materials: | |
| 30 meters at $30 per meter | $ 900 |
| Estimated direct labor: | |
| 16 hours at $30 per hour | 480 |
| Estimated factory overhead (75% of direct labor cost) | 360 |
| Total estimated costs | $1,740 |
| Markup (40% of production costs) | 696 |
| Total estimate | $2,436 |
On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation were completed on October 10.
The related The form or electronic transmission used by a manufacturing department to authorize materials issuances from the storeroom.materials requisitions and The form on which the amount of time spent by each employee and the labor cost incurred for each individual job, or for factory overhead, are recorded.time tickets are summarized as follows:
| Materials Requisition No. | Description | Amount | |
| 112 | 15 meters at $30 | $450 | |
| 114 | 19 meters at $30 | 570 | |
| Time Ticket No. | Description | Amount | |
| H10 | 8 hours at $30 | $240 | |
| H11 | 12 hours at $30 | 360 | |
Required:
Enter amounts as positive numbers.
1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer.
2. Record the costs incurred, and complete the job order cost sheet.
| JOB ORDER COST SHEET | |||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||
| Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
| Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| 30 Meters at $30 | 16 Hours at $30 | Direct Materials | |||||||||||||||||||||||||||||||||||||||||||||
| Direct Labor | |||||||||||||||||||||||||||||||||||||||||||||||
| Factory Overhead | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | Total | Total cost | |||||||||||||||||||||||||||||||||||||||||||||
| ACTUAL | |||||||||||||||||||||||||||||||||||||||||||||||
| Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
| Mat. Req. No. | Description | Amount | Time Ticket No. | Description | Amount | Item | Amount | ||||||||||||||||||||||||||||||||||||||||
| 112 | 15 Meters at $30 | H10 | 8 Hours at $30 | Direct Materials | |||||||||||||||||||||||||||||||||||||||||||
| Direct Labor | |||||||||||||||||||||||||||||||||||||||||||||||
| 114 | 19 Meters at $30 | H11 | 12 Hours at $30 | Factory Overhead | |||||||||||||||||||||||||||||||||||||||||||
| Total | Total | Total Cost | |||||||||||||||||||||||||||||||||||||||||||||
What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that the additional meters of material used in the job were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work.)
a.)The direct materials cost exceeded the estimate by $120 because 4 meters of materials were spoiled. The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $90 of factory overhead was allocated because of the increase in direct labor.
b.)Management didn't provide enough direction to complete tasks on budget.
c.)The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled.
d.) The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee.
