Remnant Carpet Company sells and installs commercial carpeting for office buildings.

Remnant Carpet Company uses a 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 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, 2016, Remnant Carpet

Company gave Jackson Consulting an estimate of $9,450 to carpet the consulting firm's newly leased office. The estimate was based on the following data:

Estimated direct materials:

200 meters at $35 per meter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,000

Estimated direct labor:

16 hours at $20 per hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

Estimated factory overhead (75% of direct labor cost) . . . . . . . . . . . . . . . . 240

Total estimated costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,560

Markup (25% of production costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,890

Total estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,450

On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation was completed on October 10.

The related materials requisitions and time tickets are summarized as follows:

Instructions
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 prepare a job order cost sheet. Comment on the reasons 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.

Transcribed Image Text:

Materials Requisition No. 112 114 Description 140 meters at $35 68 meters at $35 Amount $4,900 2,380 Amount $200 200 Time Ticket No. H10 H11 Description 10 hours at $20 10 hours at $20