Part C: Job Order Costing (TOTAL GRADE: 27%) Part C Instructions: Be careful! This section requires you to place your answers on your Team Project document but some of the answers must be completed on two Job Cost Sheets (for your special jobs job cost sheets) and some must be completed on a multi-page General Journal (for special jobs and other jobs journal entries) and other answer must be completed directly after the question. Answers to questions Part C.Q2, Part C.Q3 and Part C.Q4 that require you to post your answers on two separate Job Cost sheets (i.e., one job cost sheet should be used for each special job). You should accomplish this by locating the Job Cost Sheet template at the end of Part C and using these job cost sheets to answer these questions. The Job Cost Sheet template contains two (2) blank Job Cost Sheets so you can post the entries for the two special jobs on the appropriate sheet that you identify as belonging to each specific job. Answers to questions Part C.Q1, Part C.Q.5 and Part C.Q6.c. require answers to be journalized on the General Journal template. Use the General Journal template located at the end of Part C to answer these journal entry questions. All other Part C questions should be answered immediately following the questions on your Team Project document. Please follow these instructions and read the questions below carefully so you do not lose any points. Read the following background and then complete the questions which follow that relate to Part C manufacturing costs that occurred during December. Many of the costs relate to two custom jobs whose costs need to be posted to Job Cost Sheets as well as journalized on the general journal. The costs unrelated to the special jobs have to be posted to the general journal only. Reference the various transactions outlined below under Part C Background and the related questions under Part C Questions in order to identify which transactions should be posted to which document(s). If you get confused, please ASK instructor for clarification. Part C Background: The following six transactions occurred for CSW during the month of May 2017. You will be asked to record these transactions on a job order cost sheet AND journalize the same transactions in a general journal for all transactions that follow. See questions following the background transactions. Some part C questions will not relate to these transactions. CSW is working on two customer special-orders for Super-uPong launchers, a robotic training device, during the month of May 2017. The special orders are for two customers: Jobs S444, retail store, Sports Plus and Job T530, wholesale company, Crest Sporting Goods. These jobs require the use of job cost sheets because they are custom orders for their retail or wholesale customers and orders are not made to exact specifications. Additionally, CSW also works on other custom jobs that require the use of job order costing system during May. Using a job cost system to produce these orders, the following events occurred during May 2017. CSW has a May 31 fiscal year-end and closes their general ledger on a monthly basis. 1. Two store customers, Sports Plus. (Job S444) and Crest Sporting Goods (Job T530) request special customer job orders on May 4. Job cost sheets were started on this date. Job T530 requests 360 Super-uPong-MSAO while Job S444 requests 200 Super-uPong- ProAdv. Both customers request their products to be delivered to them no later than by May 19th. 2. Raw materials were requisitioned from the companys inventory on May 5 for $107,005, on May 10 for $104,050 and on May 15 for $108,106. In each instance, 70% of these materials were for Job S444 and the rest (30%) was used for Job T530. 3. Six time tickets were turned in for these two special jobs for a total amount of 54 hours of work. All the workers were paid $19.50 per hour. The time tickets were dated May 7, May 13, and May 18. The daily rate was $351 because on each of those three days, 18 direct labor hours were spent on these jobs. For each day, 30% was spent for Job T530 and the rest (70%) was used for Job S444. 4. CSW uses the traditional overhead costing method based on direct labor hours. The expected direct labor hours for the year are 75,000 hours, and the anticipated overhead costs are $4,500,000 annually. To apply overhead to job cost sheets, obtain the actual direct labor hours from transaction #3 above. Both of these special orders were completed on May 20, producing 360 items of model Super-uPong-MSAO for Job T530 and 200 items of model Super-uPong-ProAdv for Job T444. Both special jobs were transferred to finished good inventory on 5/20. 5. Additional job order production activities during this month included the following: May 1 Purchased raw materials from Princeton Supply Company on account for $51,500 May 2 Issued $80,000 of direct materials from the companys inventory to jobs other than T530 and S444 and issued $3,200 of indirect materials. May 12 Owe CSWs factory salaries and wages in the amount of $80,000. May 13 Paid the factorys gas bill costing $13,000 in cash. May 15 Transferred $65,000 of job costs from other completed jobs to finished goods. May 20 Transferred to finished goods costs relating to completed custom jobs, Job S444 and Job T530. [This transaction is the only one that relates to the custom units, Jobs T530 and S444. You will need to add the totals for each Job Cost Sheets in order to determine the cost of these completed jobs.] May 21 Owe CSWs factorys electric bill costing $12,500. Will pay invoice in two weeks. May 31 Made adjusting entries for the factory that included accrued property taxes of $15,600, prepaid insurance of $8,500, and added to accumulated depreciation for factory equipment of $21,000. Part C Questions: Part C Questions should be answered based on the background information / transactions (transaction 1- 6 as specified) provided above and any additional information provided in the questions below. C.1 RECORD ANSWERS TO THIS QUESTION ON THE GENERAL JOURNAL. Instructions follow. A. Use the General Journal template that is located at the end of Part C to answer this question. B. Based on transactions outlined in Part C background under transactions 1, 2, 3 and 4 for the two special jobs, post to the general journal all relevant manufacturing costs (i.e., DM, DL and MO costs) relating to the two special jobs, Jobs S444 and Job T530. C. These manufacturing costs have transpired over several days and your entries should reflect these dates in proper date order (i.e., chronologically). D. Create summary journal entries for each cost element (add both jobs together for each cost element) and for each date (i.e., for DM date 5/4, you should pick up total DM cost provided for that date for both jobs in the transaction background detail (before you allocated the costs to the special jobs on the job order sheet). E. Your description should indicate that the entry is for DM costs used for these 2 special jobs for this transaction. Use the same technique to create journal entries for DL and MO costs, by picking up the total labor cost from background transaction details before allocating to their respective job cost sheets and by applying predetermined overhead rate to the total labor hours used for both jobs. F. In using good accounting form, journal entries should be placed in chronological order and should be placed in the correct order they were processed (i.e., for each of the 3 groups of transactions, the 1st journal entry should for be DM used on the jobs, the 2nd entry should be for DL used to build the material on the jobs and the 3rd entry should be for MO applied to those jobs.) G. Round all calculations in Part C for questions involving journal entries and job cost sheet to 2nd decimal place (X.XX or X.XX%). H. You should have nine journal entries in total relating to building these special orders. I. Manufacturing overhead is based on machine hours but should still take its lead when factory labor is utilized (create MO entry right after your create DL entry with same date. J. Add explanations for all journal entries you create. K. REMEMBER: you will later need to add additional journal entries whose dates will be in the same period. You will need to insert these additional transactions between some of your original entries in order to maintain proper chronological order. This will occur when you journalize additional costs from Part C background transaction #5 (Part C Q C.5) so be prepared to edit your original journal entry order. [Use add a line to add additional journal entry lines]. L. You can easily create journal entries using the soft copy MS Word document provided via email. This will allow for easier insertion of additional entries [use insert row above or below the line you want to insert]. This method allows you to add additional journal entry lines whenever and wherever needed. M. As alternative to typing your journal entries, you can also print out the blank journal entry form and prepare your draft journal entries in pencil to determine the proper order and prepare your final entries manually. Your final journal entries must be neat and legible and in good accounting order to avoid losing points. SOLUTION See GENERAL JOURNAL for answers C.2 RECORD ANSWERS TO THIS QUESTION ON JOB COST SHEETS. Instructions follow. A. Utilize the two Job Cost Sheets templates that are located at the end of Part C to answer this question. B. Create job cost sheets for the two special jobs, Jobs S444 and Job T530, based on preliminary information provided in Part C background, transaction 1. C. You should have two Job Cost Sheets as each job requires a separate Job Cost Sheet. D. Post to each Job Cost Sheet the date the job was started, requested shipment date from the customer, the products being ordered by the customer, the customer name, customer job number, and quantity ordered (i.e., # of units). E. All preliminary customer and order information should be posted to each job cost sheet and you should be ready to post the forth coming transactions to each of the job cost sheets for Jobs S355 and T530. F. Round all calculations in Part C to 2nd decimal place (X.XX or X.XX%): round predetermined overhead rate to 2nd decimal place, cost allocated to each job cost sheet for each cost type (DM, DL, MO) to 2nd decimal place, total cost of each special job, unit cost calculation of each special job, and total cost of both finished jobs, whenever necessary to round.) This method should be completed for each day worked, each cost type (DM, DL, MO) and each job cost sheet. SOLUTION See JOB COST SHEETS for answers C.3 RECORD ANSWERS TO THIS QUESTION ON JOB COST SHEETS. Instructions follow. A. Based on the same transactions (transactions 1 to 4) you used for the journal entries you created for your special jobs (Q. C.1) for Jobs S444 and Job T530, in Part C Q1, allocate the costs for direct material, direct labor and manufacturing overhead based on information provided. B. Post these allocated costs to each of the respective job cost sheets you set up in Q C.2 for Jobs S444 and Job T530. C. Note the amounts and dates these costs were incurred on the Job Cost Sheet. You may share the same line when the same date is incurred. D. You should have posted nine cost entries to each job cost sheet on the date specified. E. Unlike the journal entries, these costs must be properly allocated between the two job cost sheets. F. Total all costs once costs are said to be complete in the DM, DL and MO columns. SOLUTION See JOB COST SHEETS for answers C.4 RECORD ANSWERS TO THIS QUESTION ON JOB COST SHEETS. Instructions follow. A. Use the two Job Cost Sheets templates already started in C.2 above. B. Based on the journal entries you created for your special jobs, Jobs S444 and Job T530, in Part C Q2, and the information provided in Part C background transactions 1 through 4 relating to the allocation for the various cost elements to the two special jobs, post these individual costs (DM, DL, and MO costs) to Jobs S360 and T555 using their respective Job Cost Sheets. C. Note the amounts and dates these costs were incurred. D. You should have posted nine cost entries in total to each job cost sheet. E. Unlike the journal entries, these costs must be properly allocated between the two job cost sheets. F. Expectations are that each allocated cost for DM, DL and MO are posted rounding to the 2nd decimal place whenever necessary. G. Complete the two job cost sheets for Jobs S444 and Job T530, by performing the following: H. Determine and post totals on each job cost sheet for each of the 3 manufacturing costs in the space provided at the bottom of each cost element column (i.e., post in the yellow space at the bottom of each element column the total DM, total DL and total MO). I. Additionally, post these three total cost elements in the Cost Summary area on the right lower portion of each job cost sheet. J. Calculate total manufacturing cost for each job cost sheet and post it to the proper line. K. Show your calculation for unit cost in the proper space and post the unit cost amount in the proper line on each sheet. L. Round your total cost and unit cost calculations to the nearest cent (i.e., $XXX.XX). Show your formula where required. M. Determine and provide overhead rate used in your calculation; show formula used. Round to 2 decimal places. N. Determine and provide all allocation amounts used for each DM, DL and MO entry. Round to 2 decimal places when necessary. O. Determine and provide calculation for total finished goods cost for the special jobs that should be journalized on the general journal on the date work is completed. Post this entry if it has not yet been done by another team member. (Add total manufacturing costs for each of the two special jobs together to get total finished goods costs; costs should come out of work in process inventory and be put into finished goods inventory). SOLUTION See JOB COST SHEETS for answers C.5 RECORD ANSWERS TO THIS QUESTION ON GENERAL JOURNAL. Instructions follow. a. Use the same General Journal template you began when you answered Q C.1; you will need to inset many of these entries between other entries already posted. b. Journalize on the general journal all other costs that occurred during this same period of time (i.e., other production costs incurred during the month other than those for the two special jobs). You will find these transactions in transaction #5 in the Part C background. c. These costs were not related to special Jobs S444 and Job T530. d. These costs have not been posted to any Job Cost Sheet or journal entry by you. e. Record all entries (from C.1 and C.5) chronologically (in proper date order and proper process order). [Note: This means you will need to insert these additional entries between entries you already posted in Part C Q C.1 above in order to place entries in correct date order as required by good accounting form.] f. Use proper debit and credit accounting format, indenting entries as needed and placing them in proper debit and credit columns. g. Include brief explanations for all entries. Place the label Q C.1 and C.5 at the beginning of this General Journal (right before the first entry date) signifying your answers for Part C Qs C.1 and C.5). SOLUTION See JOB COST SHEETS for answers C.6. RECORD SOME ANSWERS TO QUESTION 6 immediately following question (PARTS 6.A. AND 6.B.) and RECORD on THE GENERAL JOURNAL (Part 6.C.) the JOURNAL ENTRY ANSWER. General Journal template is located at the end of Part C. Perform the following: A. Determine the following: i. Determine whether Manufacturing Overhead has a Debit or Credit balance after incurring $4,200,000 manufacturing costs and applying $3,800,000 manufacturing overhead. ii. Determine whether overhead has been under- or over- applied based on the above example. Do NOT take into account any other information provided for the company in this section. Just answer the question asked in this question assuming no other information is relevant. iii. Explain the meaning of applied-overhead and under-applied overhead in 1-3 sentences. B. Illustrate via a T account the transactions provided in Section C Q6A to show manufacturing overhead incurred and applied. Show whether it has a Debit or Credit balance by showing the balance on the proper Debit or Credit side using this T account. C. Create the adjusting entry that would correct the overhead issue cited in this problem. i. Post the correcting manufacturing overhead adjusting entry as the last entry on the general journal. ii. The General Journal template can be found at the end of Part C but should have been used for other entries from Q C.1 and C.5; use the same template that was used for the special jobs and other transaction that occurred in May 2017. iii. Post this entry with the date 5/31/17. iv. Place a label immediately above the start of this entry as Q C.6.C. SOLUTION C.6.A.i. C.6.A.ii. C.6.A.iii. C.6.B. ___________________Manufacturing Overhead___________________ | | | C.6.C. See GENERAL JOURNAL Correcting entry answer to C.6.C was posted to general journal C.7. Record answers under solution following each question. A. Explain the meaning of over- and under- applied overhead by writing1-2 sentences describing the meaning of these terms. B. Answer the following questions. i. Explain whether a company would make a profit on this product if costs are under-applied. Why or why not? ii. Would this type of product more likely have a higher or lower price than their competitors? Explain your reasoning in 1-2 sentences. iii. Would customers likely buy this product based on this new price? Explain. C. Answer the following questions. i. Explain whether a company would likely make a profit on this product if costs are over-applied. Why or why not? ii. Would this type of product more likely have a higher or lower price than their competitors? Explain your reasoning in 1-2 sentences. iii. Would customers likely buy this product based on this new price? Explain. D. Answer the following questions. i. Explain the type(s) of cost(s) that are posted to debit side of manufacturing overhead. ii. Conversely, explain the type(s) of cost(s) posted to the credit side of manufacturing overhead. SOLUTION C.7.A. C.7.B.i. C.7.B.ii. C.7.B.iii C.7.C.i. C.7.C.ii. C.7.C.iii. C.7.D.i. C.7.D.ii. C.8 Record answers under solution following this question. CSW uses direct labor hours (DLH) for their cost driver for their overhead for building green fluorescent TT balls, one of the regular products. This product primarily utilizes machines to make these products with little intervention from laborers. Is DLH the best cost driver to use for TT balls? Why or why not? What is likely to happen by using this cost driver for this product? (HINT: speak in terms of customer demand for product customer would be more or less likely to purchase - and price/cost of product product would have higher or lower price than competitors). SOLUTION C.8 Templates for job order cost sheets follow. Use them to complete the following questions: Part C Q. C.2., C.3., and C.4. Template (2 pages of blank journal entry lines) for general journal questions follows. Use them for the following questions: Part C Q C.1., C.5 and C.6.C. The following two job cost sheets should be used to answer questions for two special jobs for Part C Q C.2, C.3 and C.4. CRESCENT SPORTS WORLD JOB COST SHEET Job # _______________________ Quantity ordered: __________________ units Customer name: Date ordered: __________________________ Deadline requested: _____________________ Model #: _____________________ Date Completed: _________________________ DATE DIRECT MATERIALS DIRECT LABOR MANUFACTURING OVERHEAD HOURS RATE AMOUNT TOTALS: COST SUMMARY: AMOUNT ($ USD) Direct Materials $ Direct Labor Manufacturing Overhead Total cost Unit Cost calculation: ( = .) Calculations need only list once on one job cost sheet as long as you provide both allocation calculations here or there MO RATE: DM DL MO ALLOCATION CALCULATIONS: DM: DL: MO: CRESCENT SPORTS WORLD JOB COST SHEET Job # _______________________ Quantity ordered: __________________ units Customer name: Date ordered: __________________________ Deadline requested: _____________________ Model #: _____________________ Date Completed: _________________________ DATE DIRECT MATERIALS DIRECT LABOR MANUFACTURING OVERHEAD HOURS RATE AMOUNT TOTALS: COST SUMMARY: AMOUNT ($ USD) Direct Materials $ Direct Labor Manufacturing Overhead Total cost Unit Cost calculation: ( = .) MO RATE: DM DL MO ALLOCATION CALCULATIONS: DM: DL: MO: FINISHED GOODS CALCULATION for special jobs: C.1, C.5, and C.6.C General journal template follows. Use general journal template for answering questions for Part C Q C.1., C.5 and C.6.C. The entry for Q C.6.C. should be the last entry posted (you should have two 5/31 entries when you are finished but place C.6.C after accrual entry). Place all entries in date order. GENERAL JOURNAL DEBIT CREDIT GENERAL JOURNAL DEBIT CREDIT