Prepare journal entries to record the above information.
For this assignment, please complete and submit Task 1 and Task 2 as described below.
Task 1: Performance Reports
At the end of last year, Cyril Fedako, chief financial officer (CFO) for Fedako Products, received a report comparing budgeted and actual production costs for the company’s plant in Forest Lake, Minnesota:
|
Manufacturing Costs |
|||
|
Budget |
Actual |
Difference |
|
| Materials |
$3,200,000 |
$3,500,000 |
$300,000 |
| Direct Labor |
$2,300,000 |
$2,500,000 |
$200,000 |
| Supervisory salaries |
$475,000 |
$500,000 |
$25,000 |
| Utilities |
$125,000 |
$135,000 |
$10,000 |
| Machine maintenance |
$350,000 |
$380,000 |
$30,000 |
| Depreciation of building |
$90,000 |
$90,000 |
$5,000 |
| Depreciation of equipment |
$250,000 |
$ 255,000 |
$5,000 |
| Janitorial |
$220,000 |
$235,000 |
$15,000 |
| Total |
$7,010,000 |
$7,595,000 |
$585,000 |
His first thought was that costs must be out of control since actual costs exceed the budget by $585,000. However, he quickly recalled that the budget was set assuming a production level of 60,000 units. The Forest Lake plant actually produced 65,000 units in the last year.
a. Given that production was greater than planned, should Cyril expect that all actual costs will be greater than budgeted? Which costs would you expect to increase, and which costs would you expect to remain relatively constant? Substantiate your response with appropriate references from the textbook.
b. Cyril is extremely busy-the company has six other plants. Therefore, he cannot spend time investigating every departure from the budget. With this in mind, which cost(s) should Cyril concentrate on in his investigation of budget differences? Substantiate your response with appropriate references from the textbook.
Task 2: Job-Order Costing: Inventory Accounts and Cost of Goods Sold
Smith Die Company manufactures cutting dies for the shoe industry. Each set of dies is custom designed to a customer’s templates. During the first week of May, six orders were received from customers. They were assigned job numbers 1005 to 1010. The following transactions occurred during the first week of May.
Smith Die purchased steel on account from Eastern City Steel costing $5,000. The company received and paid for supplies (indirect materials) from Mallard Supply costing $2,300. Material requisitions indicated that materials were issued to the factory floor as follows:
|
Job No. |
Direct Materials |
Indirect Materials |
|
1005 |
$600 |
|
|
1006 |
$800 |
|
|
1007 |
$1,500 |
|
|
1008 |
$600 |
|
|
1009 |
$400 |
|
|
1010 |
$300 |
|
|
Total |
$4,200 |
$800 |
The labor time ticket summary reflected the following costs for the week:
|
Job No. |
Direct Labor |
Indirect Labor |
|
1005 |
$1,500 |
|
|
1006 |
$1,900 |
|
|
1007 |
$3,200 |
|
|
1008 |
$1,300 |
|
|
1009 |
$800 |
|
|
1010 |
$600 |
|
|
Total |
$9,300 |
$6,400 |
Overhead was applied to all jobs in process at 180 percent of direct labor cost. Jobs 1005, 1006, 1007, and 1008 were completed and transferred to finished goods. Jobs 1009 and 1010 were still in process at the end of the week. Jobs 1005, 1006, 1007, and 1008 were shipped to customers and billed at 150 percent of total job cost.
a. Calculate the total cost of each job.
b. Prepare journal entries to record the above information.
Source: Jiambalvo, J. (2010). Managerial accounting (5th ed.). Hoboken, NJ: Wiley.
Submission Requirements:
• Answer each problem in detail with a conclusion and results.
• Submit your answer in a Microsoft Excel file, showing step-by-step solutions for all calculations
