Job 999 was started and completed in 2016.

| March 31, 2017

Question
case cover.pdf
Job 999 was started and completed in 2016. The Job required 1,500 machine hours, 1,300 direct labor hours, and $550,000 in direct materials to complete.

i. What was the total cost of this job?
ii. If Cost of Goods Sold was 55% of sales, what sales price would be charged for the sub.

ACCT 201
Case #02

Oranged
Crush
$1m – $3m

Job Order
Costing
&
ACCT 201B
Managerial
Accounting

The
Yellow
Submarine

The Ultimate
In
Personal Underwater
Transportation

Spring
2016
$1.5m – $3.0m

Course
Instructor:
Randy Hoffman


Completed Case is Due Thurs, Feb 18 Beg of class in
hard copy form
Interim group submission Requirement a. and at least
4 journal entries from Req B due via email to student
assistant at the end of class Feb 09
Interim group submission Requirement 4 due via
email to student assistant at the end of class Feb.16.
75 points possible

Case 02: Product Costing (75 pts)
Due: Thurs 2/18
Interim submissions 2/9 & 2/16

Hoffman
Spring 2016

It had been sometime since Buster A. Move stood in the unemployment line wondering why an
undergraduate degree in liberal arts hadn’t paid off. Getting his MS in Accountancy was the
catalyst to his rise as a famous entrepreneur. His coaster company, Twist & Shout, had become the
leading supplier of coasters for the next generation. But Buster knew the coaster business would
always be susceptible to economic downturns. In order to continue his company’s growth and
protect his shareholders he purchased a small business which he believed was impervious to
economic downturns.
This recently acquired business, Deep Six, built personal submarines for the well-to-do. The market
for the company’s products was people insulated from the realities of the here-and-now and who
continued to spend their money regardless of economic conditions. With price tags of $750,000 to
$3.0 million, the personal submarines were not in reach of most consumers. In addition to the
initial staggering price tags, there were significant annual operating costs for continued training,
maintenance contracts, insurance, etc.
Bust’s customer list was a who’s-who of the rich-andfamous — rock stars, academy award winners, technology billionaires, heads of state and many
more.
Deep Six had invested a lot of money to build highly automated manufacturing facility which
employed the very latest in robotic technology. Since each submarine was customized and built to
order, the company’s controller, Mr. Sub Standard, decided to use a job order costing system to
accumulate product costs.
At the end of 2015, Deep Six’s senior accountant, Sunk Cost, a recent CSUF graduate, developed the
following expectations for 2016 based on the VP Marketing’s, Ms. Saltee Walters, sales forecast:
Budgeted Overhead Costs
Estimated machine hours
Estimated direct labor hours
Estimated direct material cost

$2,100,000
100,000
20,000
$3,000,000

The Inventory count, completed on December 31, 2015, revealed the following ending inventory
balances:
Inventory Account
Raw Materials Inventory
Work in Process Inventory
Finished Goods Inventory

Page 1 of 3

Amount
$ 500,000
$1,252,000
$ 680,000

Case 02: Product Costing (75 pts)
Due: Thurs 2/18
Interim submissions 2/9 & 2/16

Hoffman
Spring 2016

The company’s 2016 payroll data revealed the following actual payroll costs for the year:
Title
COO
VP Marketing
Controller
Senior Accountant
Factory manager
Assist factory mgr
Machine operator /assembler
Other Admin Salaries
Guard, factory
Materials handler
Secretary Corp
Janitor, factory

Number In
Category
1
1
1
1
1
1
6

Hourly
Pay

$

Annual
Salary
$ 250,000
175,000
150,000
75,000
80,000
64,000

16.50

Hours Worked
Per Employee

3,500
156,000
25,000

3
4
1
3

$

9.50

2,500
40,000

$

8.00

2,250

The following information was taken from the company’s schedule of Plant Assets. All assets are
depreciated using the straight-line method.
Plant Asset
Factory building
Admin office
Factory Equipment

Purchase Price
$8,000,000
$1,300,000
$4,000,000

Salvage Value
$300,000
$250,000
$40,000

Useful Life
20 Years
30 Years
12 Years

Other miscellaneous costs for 2016 included:
Cost
Factory insurance
Administrative office utilities
Sales office utilities
Factory utilities
Factory lounge (magazines)
Factory cafeteria supplies
Admin Office supplies

$
$
$
$
$
$
$

Amount
16,000
8,200
1,800
28,000
1,200
800
6,000

Additional information about the operations at Deep Six in 2016 includes the following:
Page 2 of 3

Case 02: Product Costing (75 pts)
Due: Thurs 2/18
Interim submissions 2/9 & 2/16

Hoffman
Spring 2016

1. Raw materials purchases for the year 2016 amounted to $3,890,000;
2. The company used $3,740,000 in raw materials during the year. Of that amount,
85% was direct materials and 15% was indirect materials;
3. Deep Six applied overhead to Work In Process Inventory based on direct materials costs.
4. Subs costing of $6,900,000 to manufacture were completed and transferred out of
Work in Process Inventory.
5. Sales for the year were $13,140,000; Cost of Goods Sold is 55% of selling price.
If a calculation is made to arrive at an answer then the calculation must be shown in order to
receive credit – a number without showing how it was derived is just a number.
Requirements:
a. What was the company’s predetermined overhead rate in 2016? (Interim submission due 02/09)
b. Prepare the journal entries to record the company’s costs for 2016. (MUST INCLUDE A
DESCRIPTION AS TO THE PURPOSE OF THE JOURNAL ENTRY TO RECEIVE CREDIT.)
(Interim submission due 02/09 any four journal entries)
c. Post the journal entries for the following six T-accounts. You must cross reference your journal
entries that are posted to the t-accounts – see example:

1)
2)
3)

Direct materials
Work in Process
Manufacturing Overhead

4)
5)
6)

Finished Goods
Cost of Goods Sold
Sales

d. Was manufacturing overhead:
i.
Under- or over- applied in 2016?
ii. By how much?
e. Make the adjusting entry necessary to close the under- or over- applied manufacturing
overhead to cost of goods sold
f. Job 999 was started and completed in 2016. The Job required 1,500 machine hours,
1,300 direct labor hours, and $550,000 in direct materials to complete.
i.
ii.

What was the total cost of this job?
If Cost of Goods Sold was 55% of sales, what sales price would be charged for the
sub.

g. Prepare Cost of Goods Manufactured Schedule for 2016. (Interim submission due 02/16)
h. Prepare an Income Statement for year 2016
Page 3 of 3

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