Woodbridge Furniture Company produces custom furniture for walkin customers. Products include coffee tables, shelving units, bookshelves, 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 Robinson Torres, who has one fulltime carpenter assisting him in designing and supervising jobs. Robinson has worked in the industry for many years and has just started the company. Currently, for customer pricing inquiries, Robinson provides a quote based on his best estimate and years of experience in the business and applies a 50% markup on cost. Robinson's daughter Kate is a 4lhyear accounting student at Humber and at home for the reading week break. Kate suggested to Robinson the benefits of a job-order costing system to track costs of production and how this could be used for quoting sales prices to prospective customers. Kate suggested using a predetermined manufacturing overhead rate based on direct labour hours. Robinson believes he could use this managerial accounting tool in his new business and set aside a few hours to collect and generate the following estimated data: Monthly Estimates: Direct materials kiln-dried pine $37/board foot Direct materials kiln dried oak $48lboard foot Direct labour $22.50/hour Direct labour hours for both jobs 120 Degreciation groduction eguigment $1,270 Utilities - production space 1,518 Other raw materials 344 Wood shipping cost 338 Rent production space 1,670 Rent sales and administrative space 1,510 Carpenter's salary and benets 1,820 Robinson has received two customer inquiries for price quotes: one for 3 pine bookshelf and the other for 12 coffee tables made with oak. Robinson has generated the following estimates: Job 1 Bookshelf Job 2 Coffee Table Direct materials 102 board feet Pine 36 board feet Oak Direct labour hours 78 42 At the end ofthe month, Robinson collected the following actual data after completing Jobs 1 and 2. End-ofmonth actual data: De reciation reduction e ui ment $1,138 Utilities production space Rent production space Rent sales and administrative space Other raw materials Wood shipping cost Utilities Sales ofce space Tele hone 40% reduction 60% administrative Salaries - Sales and Administrative 1,567 Carpenter's Salary and benets 2,000 Shigping and delivery of finished goods 320 Beginning Raw materials woods 480 Ending Raw materials - Woods 368 Actual material usage and labour rate/hours equals Robinson'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 Robinson quote for each of the above two jobs to ensure protability in the long term? 2. Assume it is the end ofthe month. determine the amount of underor overapplied overhead and recommend to Robinson 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 nished (zero beginning and ending workinprocess inventory). Assume that the actual materials used. and the labour rate/hours are the same as estimated. Hint: refer to Exhibit 5.11 on page 213 of the textbook for the suooested format
