Chapter 15: Serial Problem

SP 15: Business Solutions Serial Problem 1. Cost of Direct Materials Used in June: o Add up all direct materials used in June for Jobs 602, 603, and 604. o Ensure to only include the costs accumulated in June. 2. Cost of Direct Labor Used in June: o Sum all direct labor costs used in June for Jobs 602, 603, and 604. 3. Predetermined Overhead Rate: o Calculate by dividing the applied overhead by the direct labor cost (from May’s data for Job 602): Predetermined Overhead Rate=Applied OverheadDirect Labor Cost 4. Cost Transferred to Finished Goods Inventory in June: o Include the total cost (direct materials, direct labor, and applied overhead) for Jobs 602 and 603 since they were completed in June. Tableau Dashboard Activities These are analytics-based activities that expose students to accounting data visualization. 1. DA 15-1: Compute cost of direct materials used based on job-specific costs. 2. DA 15-2: Calculate cost of goods sold by aggregating job costs for completed items. 3. DA 15-3: Calculate gross profit and account for over/underapplied overhead. General Ledger Problem (GL 15-1) • Summary Journal Entries: o Record transactions based on Problem 15-2A, calculate the total cost for each job, prepare a cost of goods manufactured schedule, and compute gross profit. Company Analysis (AA 15-1) 1. Apple’s Total Estimated Cost: o Calculate direct labor costs:  Phone support: 1,800 hours × $12 = $21,600  Technical specialists: 2,200 hours × $25 = $55,000 o Total Direct Labor: $21,600 + $55,000 = $76,600 o Overhead Applied: (1,800 + 2,200) hours × $18 = $72,000 Total Estimated Cost: $76,600 + $72,000 = $148,600 2. Quoted Price with 40% Markup: o Total Cost × 1.40 = $148,600 × 1.40 = $208,040 o Comparative Analysis (AA 15-2) 1. Gross Profit Ratio Calculation: o Use the formula: Gross Profit Ratio=Gross ProfitRevenue 2. Favorable/Unfavorable Analysis: o Compare year-over-year gross profit ratios for Apple and Google to determine whether changes are favorable or unfavorable. 3. Industry Comparison: o Compare Google’s current-year gross profit ratio to the industry average of 60%. Extended Analysis (AA 15-3) 1. Samsung’s Job Cost Calculation: o Calculate total labor cost:  Phone support: 800 hours × $11 = $8,800  Technical specialists: 1,200 hours × $22 = $26,400  Total Direct Labor: $35,200 o Overhead Applied: (800 + 1,200) hours × $24 = $48,000 o Total Cost: $35,200 + $48,000 = $83,200 2. Quoted Price with 30% Markup: o Quoted Price = Total Cost × 1.30 = $83,200 × 1.30 = $108,160 o Compare this with Apple’s quoted price of $105,000 to determine which is lower. Discussion Questions 1. Estimating Factory Overhead: o Overhead is estimated to assign production costs to jobs more accurately, helping with pricing and profit analysis. 2. Alternative Activity Bases for Overhead Application: o Examples include machine hours, square footage used, or units produced. 3. Job Cost Sheet Information: o Contains direct materials, direct labor, and overhead costs per job. It is used for pricing, budgeting, and cost control. 4. Linking Inventory and Cost Accounts: o WIP, Finished Goods, and COGS accounts are updated based on job cost sheets, reflecting the stage of production. 5. Direct vs. Indirect Materials Requisition Entries: o Direct materials: Debit WIP, Credit Raw Materials. o Indirect materials: Debit Factory Overhead, Credit Raw Materials. 6. Receiving Report vs. Materials Requisition: o A receiving report documents receipt of materials; a materials requisition authorizes material use in production. Beyond the Numbers (BTN) Ethics Challenge (BTN 15-1) • Write a memo highlighting concerns about disproportionately high overhead charges to government jobs versus contractor jobs, which could lead to ethical and legal issues. Communicating in Practice (BTN 15-2) 1. Overhead Process Steps: o Estimate total overhead, choose an allocation base, compute rate, and apply overhead. 2. Recording Applied and Actual Overhead: o Applied overhead: Debit WIP, Credit Factory Overhead. Actual overhead costs are debited to Factory Overhead. 3. Impact of Over/Underapplied Overhead: o Underapplied overhead increases COGS, while overapplied overhead decreases it. Teamwork in Action (BTN 15-3) • Job Order Costing for Medical Clinic: o A job order costing system is suitable as each patient’s treatment could be treated as a unique job, with varying resource allocations. Entrepreneurial Decision (BTN 15-4) 1. Direct Materials in Job Cost Sheet for Manufacturing vs. Service: For Wallace Detroit Guitars, direct materials (e.g., reclaimed wood) are prominent, unlike in service companies where materials are minimal. 2. Cost Categories: o Examples for Wallace Detroit Guitars:  Direct Materials: Wood, metal, finishes.  Direct Labor: Crafting labor, assembly work.  Overhead: Facility rent, utilities, equipment maintenance. o