Problem 7-52 Cost Flows through Accounts (LO 7-2, 3, 4)

Brighton Services repairs locomotive engines. It employs 100 full-time workers at $18 per hour. Despite operating at capacity, last year's performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs:

Direct Material	1038400.00
Direct Labor	4140000.00
Manufacturing Ovhd	1035000.00

Of the $1,035,000 manufacturing overhead, 40 percent was variable overhead and 60 percent was fixed.

This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow:

JOb	Direct Materials	Direct Labor
101	137500	510000
102	96000	312600
103	94300	197900
Total Man Ohd		271500
Total Marketing & Admin Cost		100000

You are a consultant associated with Lodi Consultants, which Brighton Services has asked for help. Lodi's senior partner has examined Brighton Services's accounts and has decided to divide actual factory overhead by job into fixed and variable portions as follows:

Job	Variable	Fixed
101	30200.00	104300.00
102	27800.00	88500.00
103	4900.00	15800.00
Total	$62900.00	$208600.00

Required:

a. Present in T-accounts the actual manufacturing cost flows for the three jobs in the first quarter of this year.

A table like this for Materials Inventory, Wages Payable, Variable Manufacturing Overhead, Fixed Manufacturing Overhead, Work In Process Inventory, Finished Good Inventory, Cost of Goods Sold and Under-or Over-Applied Overhead

Materials Inventory
Beginning Bal
JOb 101
Job 102
Job 103
Ending Bal

b. Using last year's overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead. (Round your answers to 2 decimal places.)

c. Present in T-accounts the normal manufacturing cost flows for the three jobs in the first quarter of this year. Use the overhead rates derived in requirement (b). (Do not round intermediate calculations.) Same T Accounts as above needed.

d. Calculate operating profit (loss) for the first quarter of this year under actual and normal costing systems.

Operating Profit or Loss	Actual	Normal