Zavala Manufacturing Company is a small family-owned business that makes specialty plastic products. Since it was started
Question:
Zavala Manufacturing Company is a small family-owned business that makes specialty plastic products. Since it was started three years ago, the company has grown quickly and now employs ten production people. Because of the nature of its products, it uses a job order costing system. The company’s manual accounting system is falling behind in processing transactions.
Two months ago, in May, Zavala’s accountant quit. You have been called in to help management. The following information is available to you:
Beginning Inventory Balances (December 31)
Materials Inventory ...................$50,420
Work in Process Inventory (Job K-2) ............ 59,100
Finished Goods Inventory (Job K-1) ............. 76,480
Direct Materials Requested by Production During the Year
Job K-2 .......................$33,850
Job K-4 ....................... 53,380
Job K-5 ....................... 82,400
Direct Labor for the Year
Job K-2 ........................$25,300
Job K-4 ....................... 33,480
Job K-5 ....................... 45,600
The company purchased materials only once (in February), for $126,500. All jobs use the same materials. For the current year, the company has used an overhead application rate of 150 percent of direct labor costs. So far this year, it has completed two jobs, K-2 and K-4, and has shipped Jobs K-1 and K-2 to customers. Job K-1 contained 3,200 units; Job K-2, 5,500 units; and Job K-4, 4,600 units. The beginning balance of Work in Process Inventory for Job K-2 consisted of $16,975 of direct materials, $16,850 of direct labor, and $25,275 of overhead.
1. Calculate the product unit costs for Jobs K-1, K-2, and K-4, and the costs so far for Job K-5.
2. From the information given, prepare job order cost cards for Jobs K-2, K-4, and K-5, and compute the current balances in the Materials Inventory, Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts.
3. Zavala’s president has asked you to analyze the current job order costing system. Do you think the system should be changed? How? Why? Prepare an outline of your response to the president.
Step by Step Answer:
Managerial Accounting
ISBN: 978-0618777181
8th Edition
Authors: Susan V. Crosson, Belverd E. Needles