Mastery Problem: Job Order Costing

Purl of Great Price Company

Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cash at the end of each month.

Each knitter has a knitting machine that is used about 2/3 of the knitter's time, the rest of the knitter's time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours per week.

The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful life of 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value.

Nov. 30 Trial Balance

POGP Company

Trial Balance

November 30, 20Y8Account TitleDebitCreditCash20,000Accounts Receivable1,000Supplies200Materials5,000Work in Process5,404Equipment12,000Accumulated Depreciation-Equipment825Accounts Payable150Common Stock10,000Retained Earnings12,000Dividends18,096Sales307,500Cost of Goods Sold255,040Factory Overhead15Wages Expense13,750330,490330,490

Predetermined Factory Overhead Rate

Since the company is more reliant on labor than machines, Maria decides to use direct labor hours (DLH) as theactivity basefor herpredetermined factory overhead rate, rather than machine hours (MH).

Estimated Selected Amounts for the YearEstimated depreciation on equipment$1,200Estimated total Office Manager/Knitting Supervisor wages$30,000Estimated office utilities$5,000Estimated factory utilities$4,800Estimated factory rent$24,000

Activity Base DataEstimated number of DLH for the year5,000Estimated number of MH for the year3,500

Compute the predetermined factory overhead rate for the current year.

$9.00 per DLH

Feedback

Review the definitions of items that are included in factory overhead for the computation of estimated total factory overhead costs.

Materials RequisitionDate: Dec. 10Req. No. 12255Job No. 83DescriptionQty. IssuedUnit PriceAmountYarn type B700skeins$5$3,500Totalissued$3,500

Time TicketNo. 1255Name:Susan BlakeWork Description:Knitting/piecingDatesJob No.Hours WorkedUnit PriceAmount12/01-12/156265$15$97512/16-12/3183103151,545Total Cost$2,520

Time TicketNo. 2274Name:Josh PorterWork Description:Knitting/piecingDatesJob No.Hours WorkedUnit PriceAmount12/01-12/156275$15$1,12512/16-12/318388151,320Total Cost$2,445

Time TicketNo. 3923Name:Mary JonesWork Description:Knitting/piecingDatesJob No.Hours WorkedUnit PriceAmount12/01-12/156260$15$90012/16-12/3183109151,635Total Cost$2,535

Job Cost Sheets

On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review theMaterials Requisitiontable to add the materials to the Job Cost Sheet for Job 83.

On December 15, review theTime Tickettables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 62 for the period December 1 through December 15.

On December 31, the last work day of the year for the knitters, review Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 83 for the period December 16 through December 31.

If there is no amount or an amount is zero, enter "0". If required, round your answers to the nearest cent.

AP, Chapter 16 Calculator Print Item 12/16-12/31 83 109 15 1,635 Total Cost $2,535 Job Cost Sheets On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review the Materials Requisition table to add the materials to the Job Cost Sheet for Job 83. On December 15, review the Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 62 for the period December 1 through December 15. On December 31, the last work day of the year for the knitters, review Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 83 for the period December 16 through December 31. If there is no amount or an amount is zero, enter "0". If required, round your answers to the nearest cent. Job 62 100 units: Sweaters Direct Materials Direct Labor Factory Overhead Total Balance Dec. 1 $5,000 $300 $104 $5,404 Dec. 15 O V 3,000 V Total Cost 5,000 V $ 3,300 104 X $ X Unit Cost X Job 83 200 units: Sweater vests Direct Materials Direct Labor Factory Overhead Total Job Cost Balance Dec. 1 $0 $0 $0 Dec. 10 3,500 3,500 V Dec. 31 4,500 9,060 X Total Cost 3,500 V 4,500 V $ O X $ 12,500 X Feedback Check My Work Assignment Score: 73.96% All work saved. Email Instructor Save and Exit Submit Assignment for Grading MacBook Air