Margin Call, Inc., which uses a job-costing system, is a labor-intensive firm, with many skilled craftspeople on the payroll. Job no. 789 was the only job in process on January 1, having costs of $22,500 as of that date. Direct materials used and direct labor incurred during January were:Job No.Direct MaterialsDirect Labor789$2,000$6,0007909,00010,00079114,0008,000Job no. 791 was the only job in production as of January 31.Required: A. Should Margin Call use direct labor or machine hours as a cost driver. Why?B. Assume that the company decided to use direct labor as its cost driver. If the budgeted amounts of direct labor and manufacturing overhead are anticipated to be $200,000 and $300,000, respectively, what is the firm's predetermined overhead rate?C. Compute the cost of
work-in-process inventory as of January 31.D. Compute the cost of jobs completed during January.E. Suppose that the company sold all of its completed jobs, adding a 40% markup to cost. How much would the firm report as sales revenue?
What will be an ideal response?
A. The company should use direct labor because it is a labor-intensive firm, with many skilled craftspeople on the payroll. More than likely, a majority of overhead is "driven" by people rather than machine operation.
B. $300,000 ÷ $200,000 = 150% of direct labor cost
| C. | Direct material | $14,000 |
| ? | Direct labor | 8,000 |
| ? | Manufacturing overhead ($8,000 × 150%) | 12,000 |
| ? | Total cost of Job No. 791 | $34,000 |
| ? | ? | ? |
| D. | Beginning work in process | $22,500 |
| ? | Direct material ($2,000 + $9,000) | 11,000 |
| ? | Direct labor ($6,000 + $10,000) | 16,000 |
| ? | Manufacturing overhead ($16,000 × 150%) | 24,000 |
| ? | Total cost of Job Nos. 789 and 790 | $73.500 |
E. Sales revenue: $102,900 ($73,500 × 140%)
You might also like to view...
A difficult choice between two moral principles that are in conflict with one another is known as a/an:
A. situational ethics B. ethical relativism C. ethical dilemma D. conflict ethics
Alice was recently criticized for the poor performance of her store this quarter. When Alice stated that profits for the company overall were down for the quarter, she mentioned that recent highway construction in front of her store was the main reason for low profits. She presented reports that compared store sales along the highway versus other stores in her town to prove her point. This is an example of
a. inoculation. b. inductive reasoning. c. deductive reasoning. d. cognitive dissonance.
A(n) ________ is used to keep track of the actual merchandise flows-what the present inventory level is, when purchased merchandise is scheduled for delivery, and how much has been sold to customers.
A. fashion-oriented bookkeeping B. model stock plan C. order point D. perpetual inventory E. open-to-buy system
Target costing
a. can be applied to services if they are sufficiently uniform. b. can be applied to services only if they are automated. c. can be applied to services that are performed in a manufacturing environment. d. cannot be applied to services.