ob Order Cost Sheet Remnant Carpet Company sells and installs commercial carpeting for office buildings. Remnant Carpet Company uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On October 1, Remnant Carpet Company gave Jackson Consulting an estimate of $2,408 to carpet the consulting firm's newly leased office. The estimate was based on the following data Estimated direct materials: 30 meters at $34 per meter Estimated direct labor: 20 hours at $20 per hour Estimated factory overhead (75% of direct labor cost) Total estimated costs Markup (40% of production costs) Total estimate 串1,020 400 300 $1,720 688 $2,408 On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation were completed on October 10 The related materials requisitions and time tickets are summarized as follows Materials Requisition No 112 114 Description 15 meters at $34 19 meters at $34 Amount $510 646
Time Ticket No. H10 H11 Required: Enter amounts 1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer 2. Record the costs incurred, and complete the job order cost sheet Description 10 hours at $20 14 hours at $20 Amount $200 280 as positive numbers OB ORDER COST SHEET Customer Jackson Consulting Date Date wanted Date completed Job. No October 1 October 10 October 10 ESTIMATE Direct Materials Direct Labor Summary Amount Amount Amount 30 Meters at $34 20 Hours at $20 Direct Materials Direct Labor
Factory Overhead Total Total Total cost ACTUAL Direct Materials Direct Labor Summary Mat. Req. No. Description Amount Time Ticket No Description Amount Item Direct Materials Direct Labor Factory Overheacd Total Cost Amount 112 15 Meters at $34 H10 10 Hours at $20 114 19 Meters at $34 H11 14 Hours at $20 Tata Total What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that the additional meters of material used in the job were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work.) a. The direct materials cost exceeded the estimate by $136 because 4 meters of materials were spoiled. The direct labor cost exceeded the estimate by $80 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $60 of factory overhead was allocated because of the increase in direct labor b. Management didn't provide enough direction to complete tasks on budget. C. The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled d. The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee. Select the correct answer from the above choices.