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Problem 2-10 Accounting for a Job-Order Cost System

Problem 2-10 Accounting for a Job-Order Cost System
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MT425 / MT 425
Managerial Finance and Accounting
Kaplan University (KU Campus)

James Jiambalvo
Managerial Accounting, 4e
Hoboken, NJ: John Wiley & Sons.

Unit 2: Accounting, Management, and Cost Decisions

Chapter 2, Problem 2-10 Accounting for a Job-Order Cost System [LO 3, 6, 7, 9] Bob and Beth Ford retired from the food services industry and began catering wedding receptions on a limited basis. The major costs in setting up their business included: linens, $1,200; two complete silver services, $1,000; glass plates and cups, $1,400; and cake-decorating tools and accessories, $600. It is expected that all of these items will last 10 years with no salvage value. Bob and Beth do all their food preparation in their apartment and have found that, in an average month, their utility bill is $100 higher than when they did not cater. All baking and cooking supplies are treated as “direct materials,” and the only other cost incurred is liability insurance at $1,400 per year. All direct materials are purchased at a local grocery for cash, and Bob and Beth pay themselves an hourly wage of $30 per hour. During the month of June, Bob and Beth catered five weddings.

Materials Labor Hours
Redfern wedding $ 400 25
Miller wedding 800 40
Walker wedding 500 20
DeSilva wedding 1,700 90
Estes wedding 600 30

The overhead allocation base is labor hours with an estimated 1,000 hours per year, and billings are at 120 percent of job cost. Overhead allocations and markups are rounded to the nearest dollar.

a. Prepare job cost sheets for each of the five catering jobs.
b. Calculate income for the month of June.



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