Burlington Furniture Company produces custom furniture for walk-in customers. Products include coffee tables, shelving units, bookcases, and hutches and can be constructed with either pine or oak. Custom kitchen cabinetry and installation will also be considered during the slower winter season. The company is owned and operated by Lina Wang, who has one full-time employee working for her. Lina has worked in the industry for many years and has just started the company. Currently, for customer pricing inquiries, Lina provides a quote based on her best estimate and years of experience in the business and applies a 40% markup on cost.

Lina's daughter Olivia has returned home for the summer after completing her first semester of an accounting program. Olivia described to Lina the benefits of a job-order costing system to track costs and as a basis for quoting sales prices to prospective customers. Lina believes she could use her cost accounting system in her new business and sets aside a few hours to collect and generate the following estimated data:

Monthly Estimates:

Direct materials - kiln dried pine $28/board foot Direct materials - kiln dried oak $35/board foot Direct labour $17.50/hour Other materials 340 Wood shipping cost 240 Direct labour hours 60 Depreciation - production equipment $1,250 Utilities $490 Rent - production space $1,550 Rent - sales and administrative space $1,210 Salaries - sales and administrative $1,440 Lina has received customer enquiries for price quotes: one is for 2 pine shelving units and the second is for 3 kitchen hutch made with oak. Lina has generated the following estimates: Job 1 - Shelving Unit Job 2 - Kitchen Hutch Direct materials 20 board feet - Pine 40 board feet - Oak Direct labour hours 25 35 At the end of the month, Lina collected the following actual data after completing Jobs 1 and 2. End-of-month actual data: Depreciation - production equipment $1,235 Utilities 1,475 Rent - production space 580 Rent - sales and administrative space 1,410Other materials 230 Wood shipping cost 256 Salaries - sales and administrative 1.460 Raw materials inventory - beginning 400 Raw materials inventory - ending 120 Actual material usage and labour rate/hours equals Lina's estimate Required: 1. Assume it is the beginning of the month, using the estimates and a job-order costing system, what price would you recommend Lina quote for each of the above two jobs to ensure profitability in the long term? 2. Assume it is the end of the month, determine the amount of under- or over-applied overhead and recommend to Lina how the amount should be accounted for. 3. Prepare a schedule of cost of goods manufactured for the month - these were the only two jobs started and sold (zero beginning and ending work-in-process inventory). Assume that actual materials used and the labour rate/hours are the same as estimated. Hint: refer to Exhibit 5.11 on page 213 of text for suggested format