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James and Mary were not only best friends, they were coworkers- coworkers who were very passionate about their jobs and their company! The Job Shop,
James and Mary were not only best friends, they were coworkers- coworkers who were very passionate about their jobs and their
company! The Job Shop, the clever name of the company where they work, produces and sells several different styles of reading
glasses. Today, on The Job Shop floor, James and Mary are discussing the styles of readers that are currently in production.
James: You see this job over here, Mary? This job (#AA110) was started last month, but now it's finally ready to ship. I heard that most
of the order is already sold, in fact.
Mary: Really? I heard something similar about the job on the other side of the plant (#AA111). That is, I heard most of it is already sold,
too. But, because that job just started at the beginning of this month, I bet it'll be more profitable because it didn't have to sit in
processing as long.
James: Mary, I don't think that's how this works. Remember our manager telling us that we need to keep our machine hours down to a
minimum? The reason is because we use machine hours to budget and apply our MOH costs to our products. If the job is just sitting
there, waiting for the next processing step to be completed, it is not using machine hours, so more MOH costs shouldn't be applied
because hours are not being used.
James is correct in that only one job (#AA110) is still in process on January 1, 2025. The job cost sheet for Job #AA110 shows that
$5,500 of direct material had been used on the job in 2024. Direct labor used on the job in 2024 was $1,150, and MOH applied to the
job in 2024 was $3,550. Mary is also correct as Job #AA111 was started in January. But two other jobs were freshly started in January,
too: #AA112, #AA113.
Material cost, labor cost, and machine hour usage for January is as follows.During 2025, The Job Shop expects to incur $265,000 of MOH and expects to work 10,600 machine hours. MOH cost incurred during
January is as follows.$13,700 of depreciation on plant and equipment.
$550 of insurance on the plant.
$3.200 of utilities.
$3,800 of indirect labor.The Job Shop had paid for the insurance in 2024, while the utilities will be paid in February 2025.
Other information:Job #AA110, which was completed during January, consists of 40 units.
Job #AA111, which was also completed during January, consists of 70 units.
Jobs #AA112 and #AA113 were not completed during January.
The Job Shop sells units for 140% of their manufacturing costs.
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