Question 4.32

4-44 CHAPTER 4 Product Costs and Job Order Costing 4.32 (LO 1, 2, 3, 4, 5, 6) Comprehensive problem Maverick Wings, Inc. manufactures airplanes for use in stunt shows. Maverick's factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Maverick uses a job order costing system to accumulate product costs. At the end of 2020, Maverick's accountants developed the following expectations for 2021 based on the marketing department's sales forecast: Budgeted overhead cost $1,050,000 Estimated machine hours 50,000 Estimated direct labor hours 10,000 Estimated direct materials cost $1,500,000 Maverick's inventory count, completed on December 31, 2020, revealed the following ending inventory balances: Raw Materials Inventory $ 75,800 Work in Process Inventory $626,000 Finished Goods Inventory $340,000 The company's 2021 payroll data revealed the following actual payroll costs for the year: Annual Total Hours Number Wage Rate Salary per Worked per Job Title Employed per Hour Employee Employee President and CEO $225,000 Vice president and CFO $178,000 Factory manager $ 48,00 Assistant factory manager $ 35,000 Machine operator $20.00 2,250 Security guard, factory -NNA $ 25,000 Forklift operator $15.00 2,000 Corporate secretary $ 35,000 Janitor, factory $12.00 2,150 The following information was taken from Maverick's Schedule of Plant Assets. All assets are depreciated using the straight-line method. Plant Asset Purchase Price Salvage Value Useful Life Factory building $4,000,000 $150,000 20 Years Administrative office $ 650,000 $125,000 30 Years Factory equipment $2,000,000 $ 20,000 12 Years Other miscellaneous costs for 2021 included: Cost Amount Factory insurance $14,000 Administrative office utilities $ 6,000 Factory utilities $32,000 Office supplies $ 5,000 Additional information about Maverick's operations in 2021 includes the following: Raw materials purchases for the year amounted to $1,945,000. . The company used $1,924,000 in raw materials during the year. Of that amount, 80% was direct mate- rials and 20% was indirect materials. . Maverick applied overhead to Work in Process Inventory based on direct materials cost. . Airplanes costing $2,870,000 to manufacture were completed and transferred out of Work in Process Inventory. . Maverick uses a markup of 150% to price its airplanes. Sales for the year were $7,250,000. (Note: This transaction requires two journal entries.) Required Use the information just given to answer the following questions: a. What was Maverick's predetermined overhead rate in 2021?Cases 4-45 b. Prepare the journal entries to record Maverick's costs for 2021. C. Prepare the appropriate T-accounts for Raw Materials Inventory, Work-in-Process Inventory, Fin- ished Goods Inventory, Manufacturing Overhead Control, Cost of Goods Sold, and Sales, and record Maverick's transactions for 2021. Calculate the ending balance in each account. d. Was manufacturing under- or overapplied in 2021? By how much? e. Make the adjusting entry necessary to close the under- or overapplied overhead to cost of goods sold. If Maverick chooses instead to prorate under- or overapplied overhead, how much would be allocated to Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold for 2021? g. Job 3827 was started and completed in 2021. The job required 500 machine hours, 300 direct labor hours, and $75,000 in direct materials to complete. What was the total cost of this job? Using Mav- erick's 150% markup, what sales price would be charged for this airplane? h. If Maverick had chosen to use machine hours as its overhead application base, what would the rate have been in 2021? Why would that application base have been a logical choice for Maverick? Cases C&C Sports Continuing Case 4.33 (LO 3, 4, 5, 6) Inventory cost flows C&C Sports has determined the following unit costs for each of its products: Pants Jerseys Jackets Direct materials $ 6.00 $10.00 $ 58.00 Direct labor 4.00 3.20 24.00 Manufacturing overhead 5.00 4.00 30.00 Total unit cost $15.00 $17.20 $112.00 Sales price per unit $19.00 $22.00 $175.00 On May 31, C&C Sports' Work in Process Inventory consisted of the following items: Job Units Accumulated Cost PA-1247-Pants 100 $1,050 JE-1397-Jerseys 200 2,720 JA 426-Jackets 50 4,250 $8,020 During June, a total of $253,800 in direct materials and $123,380 in direct labor costs were incurred. Units finished and sold during June were as follows Product Units Finished Units Sold Pants 13,500 14,000 Jerseys 3,200 3,100 Jackets 2,500 2,500 Required a. Given that C&C Sports uses direct labor dollars as its application base, what is the company's predetermined overhead rate? b. Calculate the total manufacturing cost for June. c. Calculate the Cost of Goods Manufactured for June. d. Calculate the Ending Work in Process Inventory balance on June 30. e. Calculate Cost of Goods Sold for June. f. Calculate Gross Profit for June. g. For each of the three products, state whether there are more, fewer, or the same number of fin- ished units in Finished Goods Inventory on June 30 than there were on June 1