Job Order Cost Sheet

Remnant Carpet Company sells and installs commercial carpeting for office buildings. Remnant Carpet Company uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On October 1, Remnant Carpet Company gave Jackson Consulting an estimate of $3,962 to carpet the consulting firms newly leased office. The estimate was based on the following data:

Estimated direct materials:
40 sq. ft. at $34 per sq. ft.	$ 1,360
Estimated direct labor:
28 hours at $30 per hour	840
Estimated factory overhead (75% of direct labor cost)	630
Total estimated costs	$2,830
Markup (40% of production costs)	1,132
Total estimate	$3,962

On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation was completed on October 10.

The related materials requisitions and time tickets are summarized as follows:

Materials Requisition No.	Description	Amount
112	20 sq. ft. at $34	$680
114	24 sq. ft. at $34	816

Time Ticket No.	Description	Amount
H10	14 hours at $30	$420
H11	18 hours at $30	540

Required:

Enter amounts as positive numbers.

1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer.

2. Record the costs incurred and complete the job order cost sheet.

What is the best explanation for the variances between actual costs and estimated costs? (For this purpose, assume that the additional square feet of material used in the job were spoiled, the factory overhead rate has been proved to be satisfactory, and an inexperienced employee performed the work.)

1. The direct materials cost exceeded the estimate by $136 because 4 square feet of materials were spoiled. The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $90 of factory overhead was allocated because of the increase in direct labor.
2. Management didn't provide enough direction to complete tasks on budget.
3. The direct materials cost exceeded the estimate by $102 because 3 square feet of materials were spoiled.
4. The direct labor cost exceeded the estimate by $360 because an additional 4 hours of labor were used by an inexperienced employee.

Select the correct answer from the above choices.

JOB ORDER COST SHEET Customer Jackson Consulting Date October 1 October 10 Date wanted Date completed October 10 Job. No. ESTIMATE Direct Materials Direct Labor Summary Amount Amount Amount 40 sq. ft. at $34 28 Hours at $30 Direct Materials Direct Labor Factory Overhead Total Total Total cost ACTUAL Direct Materials Summary Direct Labor Description Mat. Reg. No. Description Amount Time Ticket No. Amount Item Amount Direct Materials 310 20 sq. ft. at $34 H10 14 Hours at $30 Direct Labor Factory Overhead 312 24 sq. ft. at $34 H11 18 Hours at $30 Total Total Total Cost