The Ferndale Furniture Company produces custom furniture for walk-in customers. Products include coffee tables, shelving units, mirrors, and hutches and can be constructed with either pine or oak. Custom kitchen cabinetry and installation will also be considered during the slower winter season. The company is owned and operated by Ken McMann, who has one full-time employee working for him. Ken has worked in this industry for many years and has just started the company. Currently, for customer pricing inquiries, Ken provides a quote based on his best estimate and years of experience in the business and applies a 40% markup on cost.

Kens son Owen has returned home for the summer after completing his first semester of an accounting program. Owen described to Ken the benefits of a job-order costing system to track costs and as a basis for quoting sales prices to prospective customers. Ken believes he could use this cost accounting system in his new business and sets aside a few hours to collect and generate the following estimated data:

Monthly Estimates:

Direct materials kiln dried pine	$28/board foot
Direct materials kiln dried oak	$35/board foot
Direct labour Other materials wood shipping cost	$17.50/hour 340 240
Direct labour hours	60
Depreciation production equipment	$1,250
Utilities	$490
Rent production space	$1,550
Rent sales and administrative space	$1,210
Salaries sales and administrative	$1,440

Ken has received customer enquiries for price quotes: one is for 2 pine shelving units and the second is for 3 kitchen hutch made with oak. Ken has generated the following estimates:

	Job 1 Shelving Unit	Job 2 Kitchen Hutch
Direct materials	20 board feet Pine	40 board feet Oak
Direct labour hours	25	35

At the end of the month, Ken collected the following actual data after completing Jobs 1 and 2.

End-of-month actual data:

Depreciation production equipment	$1,235
Utilities	1,475
Rent production space	580
Rent sales and administrative space other material wood shipping cost	1,410 230 256
Salaries sales and administrative	1,460
Raw materials inventory beginning	400
Raw materials inventory ending	120

Question:

1. Assume it is the beginning of the month, using the estimates and a job-order costing system, what price would you recommend Ken quote for each of the above two jobs to ensure profitability in the long term?
2. Assume it is the end of the month, determine the amount of under- or over-applied overhead and recommend to Ken how this amount should be accounted for.
3. Prepare a schedule of cost of goods manufactured for the month - these were the only two jobs started and sold (zero beginning and ending work-in-process inventory). Assume that actual materials used and the labour rate/hours are the same as estimated.

Please example how the calculation

Burlington Furniture Company produces custom furniture for walk-in customers. Products include coffee tables, shelving units, bookcases, and hutches and can be constructed with either pine or oak. Custom kitchen cabinetry and installation will also be considered during the slower winter season. The company is owned and operated by Lina Wang, who has one full-time employee working for her. Lina has worked in the industry for many years and has just started the company. Currently, for customer pricing inquiries, Lina provides a quote based on her best estimate and years of experience in the business and applies a 40% markup on cost. Lina's daughter Olivia has returned home for the summer after completing her first semester of an accounting program. Olivia described to Lina the benefits of a job-order costing system to track costs and as a basis for quoting sales prices to prospective customers. Lina believes she could use her cost accounting system in her new business and sets aside a few hours to collect and generate the following estimated data: Monthly Estimates: Direct materials - kiln dried pine Direct materials - kiln dried oak Direct labour Other materials Wood shipping cost Direct labour hours Depreciation - production equipment Utilities Rent - production space Rent-sales and administrative space Salaries - sales and administrative $28/board foot $35/board foot $17.50/hour 340 240 60 $1,250 $490 $1,550 $1,210 $1,440 Lina has received customer enquiries for price quotes: one is for 2 pine shelving units and the second is for 3 kitchen hutch made with oak. Lina has generated the following estimates: Job 1- Shelving Unit Job 2 - Kitchen Hutch Direct materials 20 board feet - Pine 40 board feet -- Oak Direct labour hours 25 35 At the end of the month, Lina collected the following actual data after completing Jobs 1 and 2. End-of-month actual data: Depreciation - production equipment Utilities Rent-production space Rent - sales and administrative space $1,235 1,475 580 1,410 Other materials 230 Wood shipping cost 256 Salaries - sales and administrative 1,460 Raw materials inventory beginning 400 Raw materials inventory - ending 120 Actual material usage and labour rate/hours equals Lina's estimate Required: 1. Assume it is the beginning of the month, using the estimates and a job-order costing system, what price would you recommend Lina quote for each of the above two jobs to ensure profitability in the long term? 2. Assume it is the end of the month, determine the amount of under- or over-applied overhead and recommend to Lina how the amount should be accounted for. 3. Prepare a schedule of cost of goods manufactured for the month - these were the only two jobs started and sold (zero beginning and ending work-in-process inventory). Assume that actual materials used and the labour rate/hours are the same as estimated. Hint: refer to Exhibit 5.11 on page 213 of text for suggested format. Burlington Furniture Company produces custom furniture for walk-in customers. Products include coffee tables, shelving units, bookcases, and hutches and can be constructed with either pine or oak. Custom kitchen cabinetry and installation will also be considered during the slower winter season. The company is owned and operated by Lina Wang, who has one full-time employee working for her. Lina has worked in the industry for many years and has just started the company. Currently, for customer pricing inquiries, Lina provides a quote based on her best estimate and years of experience in the business and applies a 40% markup on cost. Lina's daughter Olivia has returned home for the summer after completing her first semester of an accounting program. Olivia described to Lina the benefits of a job-order costing system to track costs and as a basis for quoting sales prices to prospective customers. Lina believes she could use her cost accounting system in her new business and sets aside a few hours to collect and generate the following estimated data: Monthly Estimates: Direct materials - kiln dried pine Direct materials - kiln dried oak Direct labour Other materials Wood shipping cost Direct labour hours Depreciation - production equipment Utilities Rent - production space Rent-sales and administrative space Salaries - sales and administrative $28/board foot $35/board foot $17.50/hour 340 240 60 $1,250 $490 $1,550 $1,210 $1,440 Lina has received customer enquiries for price quotes: one is for 2 pine shelving units and the second is for 3 kitchen hutch made with oak. Lina has generated the following estimates: Job 1- Shelving Unit Job 2 - Kitchen Hutch Direct materials 20 board feet - Pine 40 board feet -- Oak Direct labour hours 25 35 At the end of the month, Lina collected the following actual data after completing Jobs 1 and 2. End-of-month actual data: Depreciation - production equipment Utilities Rent-production space Rent - sales and administrative space $1,235 1,475 580 1,410 Other materials 230 Wood shipping cost 256 Salaries - sales and administrative 1,460 Raw materials inventory beginning 400 Raw materials inventory - ending 120 Actual material usage and labour rate/hours equals Lina's estimate Required: 1. Assume it is the beginning of the month, using the estimates and a job-order costing system, what price would you recommend Lina quote for each of the above two jobs to ensure profitability in the long term? 2. Assume it is the end of the month, determine the amount of under- or over-applied overhead and recommend to Lina how the amount should be accounted for. 3. Prepare a schedule of cost of goods manufactured for the month - these were the only two jobs started and sold (zero beginning and ending work-in-process inventory). Assume that actual materials used and the labour rate/hours are the same as estimated. Hint: refer to Exhibit 5.11 on page 213 of text for suggested format