Question
Custom Automobile Restoration Shop (CARS) is a small shop dedicated to high-quality restorations of vintage cars. Although it will restore an automobile that a customer
Custom Automobile Restoration Shop (CARS) is a small shop dedicated to high-quality restorations of vintage cars. Although it will restore an automobile that a customer already owns, usually the shop buys an old vehicle, restores it, and then sells it in a private party sale or at a classic-car auction. The shop has been in existence for 10 years, but for the sake of simplicity, assume it has no beginning inventories for 2017. Five automobile restoration projects were worked on during 2017. By the end of the year, four of these projects were complete and three of them had been sold.
The following selected data are from CARS' 2017 budget:
Advertising | $ | 11,630 | |
Direct materials | 211,500 | ||
Direct labor | 190,400 | ||
Rent on office space | 10,700 | ||
Rent on factory space | 32,100 | ||
Indirect materials | 16,100 | ||
Maintenance costs for factory equipment | 5,400 | ||
Utilities costs for office space | 2,000 | ||
Utilities costs for factory space | 4,200 | ||
Depreciation on factory equipment | 12,600 | ||
Machine hours expected to be worked | 4,200 | ||
Direct labor hours expected to be worked | 6,800 | ||
The following information relates to production events during 2017:
- Raw materials were purchased for $217,100.
- Materials used in production totaled $209,600; $15,900 of these were considered indirect materials costs. The remaining $193,700 of direct materials costs related to individual restoration jobs as follows:
Job Number Direct Materials Cost 701 $ 44,300 702 36,300 703 43,000 704 40,600 705 29,500 - Labor costs incurred for production totaled $184,900. The workers are highly skilled craftsmen who require little supervision. Therefore, all of these costs were considered direct labor costs and related to individual restoration jobs as follows:
Job Number Direct Labor Cost 701 $ 41,000 702 43,000 703 49,500 704 31,000 705 20,400 - Paid factory rent of $30,300.
- Recorded depreciation on factory equipment of $13,100.
- Made $5,800 of payments to outside vendors for maintenance of factory equipment.
- Paid factory utilities costs of $4,300.
- Applied manufacturing overhead using a predetermined rate of $18.00 per machine hour. The 3,790 machine hours that were used relate to each job as follows:
Machine Job Number Hours Worked 701 780 702 850 703 920 704 890 705 350 - Completed all restoration jobs except Job 705 and transferred those projects to finished goods.
- Sold three jobs for the following amounts:
Job Number Sales Price 701 $ 127,000 702 119,200 703 111,700 - Closed the Manufacturing Overhead account to transfer any overapplied or underapplied overhead to the Cost of Goods Sold account.
Required
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Assume CARS had used direct labor hours (versus machine hours) as its cost driver. Compute its predetermined overhead rate. (Round your answer to 2 decimal places.)
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Determine the ending balance in Raw Materials Inventory.
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Determine the ending balance in Finished Goods Inventory.
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Determine the ending balance in Work in Process Inventory.
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Determine the costs of goods manufactured.
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Determine the amount of Cost of Goods Sold.
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Determine the amount of gross margin that was earned on Jobs 701, 702, and 703.
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Determine the amount of overapplied or underapplied overhead that existed at the end of the year.
(For all requirements, round your intermediate calculations to 2 decimal places.)
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