ACCT3307/8817 Managerial Cost & Strategic Analysis Tee-Tops Case Spring 2022 Comprehensive product costing and manufacturing cost flow case. (Adapted from Fundamental Managerial Accounting Concepts 3"d edition, Edmonds, Edmonds, Tsay, Olds) The Tee-Tops Company makes women's tee shirts out of nylon material. The company's operations began on January 1, 2020 when it acquired $650,000 cash by issuing common stock. The company uses normal costing and manufacturing overhead is allocated on the basis of direct labor cost. The company uses two overhead accounts (allocated and control) and the adjustment to close the manufacturing overhead accounts at the end of the year is made to Cost of Goods Sold. Assume that all transactions are in cash unless otherwise indicated and ignore income taxes for this assignment Listed below are the accounting transactions for the 2020 and 2021 accounting periods: During 2020: Y. The company was founded on 1/1/20 when it acquired $650,000 cash by issuing 65,000 shares of common stock for a price of $10 per share. The stock has a $10 par value per share. 2 On 1/2/20 the company used cash to purchase sewing equipment for $8,000 that has a useful life of 5 years and no salvage value. The company uses straight line depreciation for all their equipment. 3. The company purchased $300,000 of direct raw materials The company allocates manufacturing overhead to production on the basis of direct labor cost. The total estimated manufacturing overhead costs for 2020, the first year of operations, are $640,000. Tee-Tops estimates they will incur $128,000 of direct labor costs during the year. 5. During the year the company used $200,000 of the raw materials to make the tee shirts. 6. During the year the employees worked 9,600 hours making shirts earning $12.50 per hour. Wages are paid in cash and the rate will be consistent for 2020 & 2021. @ Between January 1 and December 31 the company completed 100,000 tee-shirts and there were no unfinished shirts in work in process inventory at the end of the year. &. / The company recorded depreciation expense on the equipment for the year. The company sold 80,000 shirts for $900,000 during the year. $800,000 was received in cash with the remainder on account. NO. The company paid $60,000 in cash for various administrative expenses. ( Actual manufacturing overhead costs paid in cash during the year were made up of factory utilities of $60,000, miscellaneous production supplies used of $6,000, and other manufacturing overhead of $538,000 (not including depreciation) During 2021: J. The Company acquired $110,000 cash by issuing 10,000 shares of common stock for a price of $1 1 per share. 2. The Company now has a better understanding of the costs that make up manufacturing overhead. They will continue to allocate manufacturing overhead to production on the basis of direct labor cost. They estimate the following costs for manufacturing overhead for the year: they expect the factory utility expense to be approximately $4,500 per month. In the beginning of 2021 they paid cash for $5,000 of miscellaneous production supplies and anticipated that all the supplies would be used during the year. All other general manufacturing overhead costs are estimated to total $436,000 for the year (including deprecation). The Company estimates that direct labor cost will be $90,000 during 2021. The company purchased $100,000 of direct raw materials and used $19,110 of these materials to make shirts in January. 4 Employees worked 840 hours at $12.50 per hour in January