Sassafras Yacht Corporation began operations on December 1, 2017. The company uses normal costing as part of a job-order cost system. During December, the company purchased $75,000 of direct material, and then used $60,000 of these direct materials to start Job 450. The company charged total conversion costs of $80,000 (direct labor and overhead) to Job 450 during December. As of the end of December Job 450 was not complete. There was no underapplied or overapplied overhead for December. The company charges overhead to jobs using direct labor HOURS (careful!). The estimated direct labor hours for 2018 are 25,000 hours and the estimated overhead cost for 2018 is $600,000 During 2018, the following transactions occurred. 1 There were 5 jobs that had work completed on them in 2018. Some of the data for these jobs are shown below: Job 450 Job 500 Job 550 Job 600 Job 650 $8,000 5,000 hrs $60,000 6,000 hrs $80,000 10,000 hrs. 2,000 hrs. $20,000 $12,000 3,000 hrs Direct Material Cost Direct Labor Hours The Direct Labor Rate for 2018 is $40 per hour. The company purchased $200,000 of direct materials. At the end of 2018, the jobs that were not finished were Jobs 600 and 650. Job 450 consisted of 5,000 units of which 4,200 sold in 2018 at a selling price of $200 each. Job 550 consisted of 15,000 units of which 10,000 sold in 2018 at a selling price of $100 each. Job 500 consisted of 10,000 units, none of which sold at the end of 2018 Other costs incurred during 2018 include the following: Advertising Expense Maintenance- Factory Administrative Expense Depreciation- Factory Utilities- Factory Selling Expente 2. 3. 4. 5. $125,000 $75,000 $450,000 $60,000 $110,000 $200,000 $275,000 S 45,000 $150,000 S 40,000 $ 60.000 S75,000 Indirect Labor Factory Insurance Corporate General Expenses F.G. Warehouse Depreciation Miscellaneous Overhead Indirect Materials Your Task: Prepare, in good form, a Schedule of Cost of Goods Manufactured for 2018 Add up the total costs of Jobs A, B and C. Does this total equal your Cost of Goods . . Manufactured from Part A? Should it? C. Compute the underapplied or overapplied overhead for 2018. Is it under or overapplied? Assume that any underapplied or overapplied overhead is closed totally to Cost of Goods Sold at the end of 2018. Prepare, in good form, an Income Statement for 2018. Now assume that we want to allocate the underapplied or overapplied overhead to the appropriate accounts at the end of 2018. Remember you must determine how much applied overhead is in WIP and Finished Goods ending inventories as well as Cost of Goods sold. Assume Finished Goods Inventory has $332,000 of applied overhead in its ending balance, and you know how much applied overhead is on Jobs 600 and 650. You should be able to determine how much applied overhead will be in Cost of Goods sold at the end of 2018. Allocate the under(over) applied overhead and show how much should be closed to each account If you prorate the under(over) applied overhead rather than charging it totally to Cost of Goods Sold, would Net Operating Income for the company increase or decrease? By how much? One way to figure this out would be to just look at the change in the adjustment to D. . F. Cost of Goods Sold. Sassafras Yacht Corporation began operations on December 1, 2017. The company uses normal costing as part of a job-order cost system. During December, the company purchased $75,000 of direct material, and then used $60,000 of these direct materials to start Job 450. The company charged total conversion costs of $80,000 (direct labor and overhead) to Job 450 during December. As of the end of December Job 450 was not complete. There was no underapplied or overapplied overhead for December. The company charges overhead to jobs using direct labor HOURS (careful!). The estimated direct labor hours for 2018 are 25,000 hours and the estimated overhead cost for 2018 is $600,000 During 2018, the following transactions occurred. 1 There were 5 jobs that had work completed on them in 2018. Some of the data for these jobs are shown below: Job 450 Job 500 Job 550 Job 600 Job 650 $8,000 5,000 hrs $60,000 6,000 hrs $80,000 10,000 hrs. 2,000 hrs. $20,000 $12,000 3,000 hrs Direct Material Cost Direct Labor Hours The Direct Labor Rate for 2018 is $40 per hour. The company purchased $200,000 of direct materials. At the end of 2018, the jobs that were not finished were Jobs 600 and 650. Job 450 consisted of 5,000 units of which 4,200 sold in 2018 at a selling price of $200 each. Job 550 consisted of 15,000 units of which 10,000 sold in 2018 at a selling price of $100 each. Job 500 consisted of 10,000 units, none of which sold at the end of 2018 Other costs incurred during 2018 include the following: Advertising Expense Maintenance- Factory Administrative Expense Depreciation- Factory Utilities- Factory Selling Expente 2. 3. 4. 5. $125,000 $75,000 $450,000 $60,000 $110,000 $200,000 $275,000 S 45,000 $150,000 S 40,000 $ 60.000 S75,000 Indirect Labor Factory Insurance Corporate General Expenses F.G. Warehouse Depreciation Miscellaneous Overhead Indirect Materials Your Task: Prepare, in good form, a Schedule of Cost of Goods Manufactured for 2018 Add up the total costs of Jobs A, B and C. Does this total equal your Cost of Goods . . Manufactured from Part A? Should it? C. Compute the underapplied or overapplied overhead for 2018. Is it under or overapplied? Assume that any underapplied or overapplied overhead is closed totally to Cost of Goods Sold at the end of 2018. Prepare, in good form, an Income Statement for 2018. Now assume that we want to allocate the underapplied or overapplied overhead to the appropriate accounts at the end of 2018. Remember you must determine how much applied overhead is in WIP and Finished Goods ending inventories as well as Cost of Goods sold. Assume Finished Goods Inventory has $332,000 of applied overhead in its ending balance, and you know how much applied overhead is on Jobs 600 and 650. You should be able to determine how much applied overhead will be in Cost of Goods sold at the end of 2018. Allocate the under(over) applied overhead and show how much should be closed to each account If you prorate the under(over) applied overhead rather than charging it totally to Cost of Goods Sold, would Net Operating Income for the company increase or decrease? By how much? One way to figure this out would be to just look at the change in the adjustment to D. . F. Cost of Goods Sold