Refco Furniture Company refinishes and reupholsters furniture. Refco Furniture 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 January 21, 2014, an estimate of $ 1,391 for reupholstering a sofa and a loveseat was given to Steve Scully. The estimate was based on the following data:

Estimated direct materials:

22 meters at $20 per meter $440.00

Estimated direct labor:

14 hours at $25 per hour 350.00

Estimated factory overhead (80% of direct labor cost) 280.00

Total estimated costs 1,070.00

Markup (30% of production costs) 371.00

Total estimate 1,391.00

On January 26, the sofa and loveseat were picked up from the residence of Steve Scully, 160 Soda Alley, Purchase, NY, with a commitment to return them on March 3. The job was completed on March 1. The related materials requisitions and time tickets are summarized as follows:

Material Requisition No. Description Amount

400 10 meters at $20 $200

403 14 meters at $20 280

Time Ticket No. Description Amount

H9 10 hours at $24 $240

H12 10 hours at $24 240

Instructions

1. Using the attached excel workbook, 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 prepare a job order cost sheet.

Comment on the reasons for the variances between actual costs and estimated costs. For this purpose, assume that two meters of materials were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work.