Accounting for a Job-Order Cost System [LO 3, 6, 7, 9]
Bob and Beth Ford retired from the food services industry and began catering wedding receptions on a limited basis. The major costs in setting up their business included: linens, $1,600; two complete silver services, $1,800; glass plates and cups, $1,800; and cake-decorating tools and accessories, $800. It is expected that all of these items will last 10 years with no salvage value. Bob and Beth do all their food preparation in their apartment and have found that, in an average month, their utility bill is $200 higher than when they did not cater. All baking and cooking supplies are treated as "direct materials," and the only other cost incurred is liability insurance at $1,800 per year. All direct materials are purchased at a local grocery for cash, and Bob and Beth pay themselves an hourly wage of $30 per hour. During the month of June, Bob and Beth catered five weddings.
Materials
Labor Hours
Redfern wedding $450 29
Miller wedding 990 43
Walker wedding 694 22
DeSilva wedding 1,720 93
Estes wedding 640 30
The overhead allocation base is labor hours with an estimated 1,000 hours per year, and billings are at 120 percent of job cost. Overhead allocations and markups are rounded to the nearest dollar.
Prepare job cost sheets for each of the five catering jobs. (Round final answers to 2 decimal places, e.g. 5.25.)
Redfern Wedding
Materials $
Labor
Overhead
Total $
Miller Wedding
Materials $
Labor
Overhead
Total $
Walker Wedding
Materials $
Labor
Overhead
Total $
DeSilva Wedding
Materials $
Labor
Overhead
Total $
Estes Wedding
Materials $
Labor
Overhead
Total $
Calculate income for the month of June. (Enter answers to 2 decimal places, e.g. 5.25.)
$
To prepare job cost sheets for each of the five catering jobs, you need to allocate the costs of materials, labor, and overhead to each job. Here's how you can calculate the cost for each job:
1. Redfern Wedding:
- Materials cost: $450
- Labor hours: 29
- Overhead allocation rate: Overhead is allocated based on labor hours, with an estimated 1,000 hours per year. So the overhead allocation rate is $200 higher utility bill / (1,000 labor hours / 12 months) = $24 per labor hour.
- Labor cost: 29 labor hours * $30 per hour = $870
- Overhead cost: 29 labor hours * $24 per labor hour = $696
- Total cost: Materials + Labor + Overhead = $450 + $870 + $696 = $2,016
2. Miller Wedding:
- Materials cost: $990
- Labor hours: 43
- Overhead allocation rate: same as above: $24 per labor hour
- Labor cost: 43 labor hours * $30 per hour = $1,290
- Overhead cost: 43 labor hours * $24 per labor hour = $1,032
- Total cost: $990 + $1,290 + $1,032 = $3,312
3. Walker Wedding:
- Materials cost: $694
- Labor hours: 22
- Overhead allocation rate: same as above: $24 per labor hour
- Labor cost: 22 labor hours * $30 per hour = $660
- Overhead cost: 22 labor hours * $24 per labor hour = $528
- Total cost: $694 + $660 + $528 = $1,882
4. DeSilva Wedding:
- Materials cost: $1,720
- Labor hours: 93
- Overhead allocation rate: same as above: $24 per labor hour
- Labor cost: 93 labor hours * $30 per hour = $2,790
- Overhead cost: 93 labor hours * $24 per labor hour = $2,232
- Total cost: $1,720 + $2,790 + $2,232 = $6,742
5. Estes Wedding:
- Materials cost: $640
- Labor hours: 30
- Overhead allocation rate: same as above: $24 per labor hour
- Labor cost: 30 labor hours * $30 per hour = $900
- Overhead cost: 30 labor hours * $24 per labor hour = $720
- Total cost: $640 + $900 + $720 = $2,260
To calculate the income for the month of June, you need to sum up the total costs of all five catering jobs and calculate the income based on the billings at 120% of the total cost:
Total cost: $2,016 + $3,312 + $1,882 + $6,742 + $2,260 = $16,212 (rounded to the nearest dollar)
Income: Total cost * 1.2 (120%) = $16,212 * 1.2 = $19,454.40 (rounded to 2 decimal places)
Therefore, the income for the month of June is $19,454.40.