RESULTS FROM IN-CLASS MANUFACTURING SIMULATION:

Sheets of paper used:

White: 4 Gold: 1 Brown: 2

Number of Quilts made: 4

ROUND ALL ANSWERS TO 2 DECIMAL PLACES (i.e.. $22.22)

A. The following production estimates were made for the coming year:

Total quilts to be produced: 20,000

Total manufacturing hours available during the year: 2,000

Total direct laborers: 3

The following cost estimates were available at the beginning of the year. Use these estimates to determine total estimated manufacturing overhead during the year: * Use variables from above for the blanks:

Estimate for Year Production

a) supervisor earns $3,800 per month = $45,600

b) Classroom rent is $ 732 per month = $8,784.00

c) Utilities cost $732 per quarter = $2,928.00

d) Pencils cost $2.00 with a useful life of 20 hours = ______

e) Scissors cost $73 with a useful life of 80 hours = _____

f) Rulers cost $7 with a useful life of 50 hours= _____

g) Glue cost (7) cents per quilt = $1,400.00

Predetermined Overhead Rate (POHR) = Estimated Total Manufacturing Overhead (SUM A-G) / Estimated total allocation base = _____ per DLH

C. Complete the following job cost sheet for your in-class job: Job Cost Sheet

Direct Materials:

White (4 sheets): cost per sheet ($2) = $8 total cost

Gold (1 sheet) : cost per sheet ($4) = $4 total cost

Brown (2 sheets ): cost per sheet (4) = $8 total cost

Total Direct Materials cost = $20

Direct Labor:

	Hours	Rate per hr.	Total
Measuring Labor	?	$14.00	?
Cutting	?	$12.00	?
Assembly Labor	?	$16.00	?

Total Direct Labor Cost = ______

Total Manufacturing Overhead:

Total MOH = Predetermined OH Rate (from previous question) * DLH used for in-class job = ______

Total Job Cost = Total DM +Total DL + Total MOH = ______

Number of Quilts (in-class job) = 4

Cost Per Quilt = ________

D. Answer the following questions:

1) If you decide to charge the bookstore cost plus 40% for the quilts, the selling price for one quilt is:

Use your answers from #1 and the job cost sheet above to answer questions 2-5:

2 If you sold all but one of the quilts you made, total sales revenue would be:

3 If you sold all but one of the quilts you made, the cost of goods sold would be:

4 If you sold all but one of the quilts you made, finished goods inventory would be:

5 If you sold all but one of the quilts you made, your total gross profit would be:

Use the following to answer questions 6-9:

Assume you mistakenly treated the cost of production labor as a period cost (operating expense) and you sold all but one of the quilts you made (for the same price calculated in #1). What is resulting effect on the following financial statement elements?

6 Assets Understated, Overstated, or No Effect ?

7 Cost of Goods Sold Understated, Overstated, or No Effect ?

8 Gross Profit Understated, Overstated, or No Effect ?

9 Net Income Understated, Overstated, or No Effect ?

10 Assume that during the year, your production workers actually worked a total of 6,250 hours. Manufacturing overhead allocated to all jobs during the year would be :

Use your answer in #10 and the following information to answer questions 11 and 12: Assume that at year end it was determined that actual manufacturing overhead totaled $64,800

11 Manufacturing overhead would be: Overallocated or Underallocated

12 By how much? ____________

Assume that the amount in #12 is not considered material and most of the quilts have been sold.

13 Which income statement account would be adjusted for the overallocated or underallocated overhead? _____________

14 Would the account be increased or decreased? _________