Custom Fabric Ventures is a small company that produces fabric$-$based wardrobe accessories $($such as$,$

handbags, scarves, and headbands$)$ and home accessories $($such as placemats, pillows, and window

treatments$).$ The company keeps a limited number of popular items in stock, but primarily produces

custom orders. Customers are able to choose from a wide selection of styles, sizes, and fabrics for each

type of product. Most of the company$$s customers are small boutiques, home d$$cor shops, and home$-$

decorators who serve clientele with discerning tastes. As a result, customers expect high$-$quality

products.

The sales staff of Custom Fabric Ventures has just received the following order:

Custom Fabric Ventures

Customer Order Form

Customer: Katie$$s Boutique

Order Date: $10/2/2012$

Order Due Date: $10/15/2012$

Description: Model Number: Quantity Unit Sales Price Total

Black & White Handbag BW$149237$ $$75$ $$525$

Due to its popularity, the Black and White Handbag $($BW$14293)$ is normally a stock item. However, the

handbag is currently out of stock. Rather than producing only enough units to fill Katie$$s order,

management would like to produce a job $($Job $114)$ that is large enough to fill Katie$$s order and replenish

stock. The fabric used for this job can be stacked four layers deep for cutting, while still maintaining the

quality and precision of the cut. Therefore, the company is able to realize some economies of scale by

producing the handbags in multiples of $4.$ Management would like to produce enough units in this job

to have a minimum of $30$ and a maximum of $35$ handbags left in stock after Katie$$s order has been filled.

Your primary task is to determine the cost of producing Job $114$ so that you can calculate the gross

profit on the sale to Katie$$s Boutique. As part of this process, you will be required to schedule

production, purchase any raw materials that aren$$t currently in stock, requisition materials for the job,

and complete the job cost record. You will also be asked to consider relevant management and

accounting issues and record the transactions related to this job in the company$$s accounting records.

The following step$-$by$-$step requirements will guide you through the entire job costing process. The

documents you will encounter in this case are normally completed electronically rather than manually.

In addition, these documents often interface with each other electronically in order to transfer data in

real$-$time, eliminate tedious calculations, and prevent errors. However, the underlying process is the

same regardless of whether the company uses electronic or manual documents.

Req. $1$: Before the year began, Custom Fabric Ventures estimated the following costs for the year:

Type of Cost Estimated total

cost for the year

Selling and Administrative salaries and expenses $$210,000$

Direct Labor $($Estimated $40,000$ DL hours @ average wage rate of $$12$ per hour$)$

Indirect plant labor $40,000$

Plant utilities $50,000$

Purchases of direct materials $1,400,000$

Lease and property taxes on the plant $120,000$

Marketing expenses $30,000$

Depreciation on production equipment $($Equipment originally costing $$700,000$

three year ago is being depreciated over a $5$ year useful life using straight$-$line

depreciation. No salvage value is expected.$)$

Indirect materials to be used in the plant $20,000$

First, fill in the missing costs. Then, calculate the company$$s predetermined manufacturing overhead

rate, assuming the company uses direct labor hours as its allocation base:

Req$\mathrm{.}2$: To realize maximum efficiency and meet management$$s desired level of stock, how many Black

& White handbags should be produced in Job $114?\_\_\_\_\_\_\_\_\_\_\_$

Req. $3$: The production engineers have given you the materials requirements for each Black & White

handbag. Assume that no efficiencies in materials can be achieved by producing more than one unit per

batch. Complete the Bill of Materials for Job #$114$ found below. Be sure to include the quantity being

produced in the Job as well as the total quantity needed for each direct material.

BILL OF MATERIALS

JOB $114$

Model: BW$14923$

Quantity: $\_\_$units

Part

Number

Description Quantity Needed

per unit

Total Quantity

needed

BWFF Black and White Floral Fabric $1/2$ yard

BWCheck Black and White Checkered Fabric $3/4$ yard

BFringe Black Fringe Trim $1$ yard

BStrap Black shoulder strapping $1$ and $3/4$ yard

PlCan Plastic Canvas $1/4$ sheet

Int$4$ Interfacing: Level $4$ sturdiness rating $1/2$ yard

Req. $4$: The production engineers have also given you the production labor requirements for each

individual bag produced, assuming one bag is produced at a time:

Cutting time: $30$ minutes per bag;

Sewing time: $70$ minutes per bag;

Ironing time: $8$ minutes per bag

Since each bag must be sewn and ironed individually, no sewing and ironing labor efficiencies can be

achieved by producing larger batch sizes. Recall, however, that fabric can be stacked for cutting

purposes, such that the material for four bags c