Solution manual accounting 21e by warreni ch 18

CHAPTER 18 INTRODUCTION TO MANAGERIAL ACCOUNTING AND JOB ORDER COST SYSTEMS CLASS DISCUSSION QUESTIONS Managerial accounting and financial accounting are different in several ways Managerial accounting is concerned with the information needs of internal decision makers, rather than external decision makers As such, managerial accounting is not subject to a defined set of reporting rules Management accountants have reasonable latitude in providing information that is useful to managers Managerial accounting has very few set rules to govern how it is done The idea of different costs for different needs suggests that there isn’t just one way to view business events Like financial accounting, managerial accounting reports can be prepared periodically In addition, managerial accounting reports can also be prepared at any time to support a decision Like financial accounting, managerial accounting reports provide information about the business as a whole Also, managerial accounting reports provide information about any level of the organization as required by management a A line department is directly involved in the basic objectives of the organization, while a staff department provides service, assistance, or advice to line departments or other staff departments b (1) Sales Department (2) Personnel Department a The role of the controller is to provide financial and accounting advice and assistance to management b The controller has a staff responsibility Memory chips would be considered a direct materials cost for a desktop computer Product cost information is used by managers to (1) establish product prices, (2) control operations, and (3) develop financial statements a Job order cost system and process cost system 10 11 b The job order cost system provides a separate record of each quantity of product that passes through the factory c Process cost systems accumulate costs for each department or process within a factory Job order costing is used by firms that sell custom goods and services to customers The job order system is frequently associated with firms that will produce a product or service specifically to a customer order No A job order cost system is not appropriate because workers could not physically differentiate between the products being worked on in different orders Materials should not be issued by the storekeeper without a properly authorized materials requisition Both the storekeeper and the recipient of the materials should initial the materials requisition when the materials are issued to indicate release of the proper amount of materials from the storeroom a The clock card is a means of recording the hours spent by employees in the factory The time ticket is a means of recording the time the employee spends on a specific job or, in cases of indirect labor (factory overhead), the department in which the time was spent b The total time reported on an employee’s time tickets for a payroll period is compared with the time reported on the employee’s clock cards as an internal check on the accuracy of payroll disbursements The sources of the debits to Work in Process are: a Summary of the materials requisitions for direct materials b Summary of the time tickets for direct labor c Data obtained when applying the predetermined factory overhead rate for factory overhead 12 The use of a predetermined factory overhead rate in job order cost accounting assists management in pricing jobs By estimating the cost of direct materials and direct labor based on past experience and by applying the factory overhead rate, the cost of a job can be estimated The predetermined rate also permits the determination of the cost of a job shortly after it is finished, which enables management to adjust future pricing policies to achieve the best combination of revenue and expense 13 a The predetermined factory overhead rate is determined by dividing the budgeted factory overhead for the forthcoming year by an estimated activity base, one that will equitably apply the factory overhead costs to the goods manufactured b Direct labor cost, direct labor hours, and machine hours 14 a (1) If the amount of factory overhead applied is greater than the actual factory overhead, factory overhead is overapplied (2) If the amount of actual factory overhead is greater than the amount applied, factory overhead is underapplied b Underapplied c Deferred credit 15 The simplest satisfactory procedure for disposing of a relatively minor balance in the factory overhead account is to transfer it to Cost of Goods Sold 16 Product costs are composed of three elements of manufacturing costs: direct materials cost, direct labor cost, and factory overhead cost These costs are treated as assets until the product is sold Product costs are sometimes referred to as inventoriable costs Period costs are costs that are used in generating revenue during the current period They are recognized as expenses on the current period’s income statement 17 Job cost information can be used to identify trends in unit costs over time for like products Comparative job cost sheets for like products can be used to investigate possible reasons for cost changes This information can help managers identify changes in efficiency, methods, procedures, and prices used in the manufacturing process 18 Job order cost accumulation would be most appropriate for professional service firms that provide extended, project-type services for clients Examples would be architectural, consulting, advertising, or legal services Job cost sheets would accumulate all direct costs of servicing the client Such costs would include labor, materials, travel, and subcontracted services In addition, overhead would be applied using a predetermined overhead rate The costs accumulated by the job cost sheet would be treated as work in process (a current asset) until the service is completed Once completed, the cost would be transferred to the cost of services on the income statement EXERCISES Ex 18–1 a b c d factory overhead factory overhead direct labor direct materials e f g h direct labor direct materials factory overhead factory overhead f g h i j direct materials direct labor direct materials factory overhead factory overhead i j k l m n o p Product Product Product Period Period Period Product Product e f g h period work in process inventory direct materials plant depreciation Ex 18–2 a b c d e factory overhead direct labor factory overhead direct materials factory overhead Ex 18–3 a, c, g, i, j Ex 18–4 a b c d e f g h Period Product Product Period Period Period Product Product Ex 18–5 a b c d product conversion increases costs Ex 18–6 a b c d e Materials requisitioned for use (both direct and indirect) Factory labor used (both direct and indirect) Application of factory overhead costs to jobs Jobs completed Cost of goods sold Ex 18–7 a Cost of goods sold: Sales Less gross profit Cost of goods sold b Direct materials cost: Materials purchased Less: Indirect materials Materials inventory Direct materials cost c Direct labor cost: Total manufacturing costs for the period Less: Direct materials cost Factory overhead Direct labor cost *$65,000 + $27,000 + $13,500 $ 850,000 235,000 $ 615,000 $ 305,000 $ 27,000 20,000 47,000 $ 258,000 $ 640,000 $ 258,000 105,500* 363,500 $ 276,500 Ex 18–8 a RECEIVED Receiving Report Number Quantity 23 29 190 140 ISSUED Unit Price Materials Requisition Number Quantity BALANCE Amount $20.00 104 250 117 160 $4,760* Date Quantity May May 120 120 190 60 60 140 40 May May 19 22.00 3,400** May 25 *May issuance 120 at $18.00 130 at $20.00 $2,160 2,600 $4,760 **May 25 issuance 60 at $20.00 100 at $22.00 $1,200 2,200 $3,400 Amount b Ending wire cable balance: 40 at $22.00 $880 c 8,160 Work in Process ($4,760 + $3,400) Materials Unit Price $2,160 $18.00 2,160 18.00 3,800 20.00 1,200 20.00 1,200 20.00 3,080 22.00 880 22.00 8,160 d Comparing quantities on hand as reported in the materials ledger with predetermined order points enables management to order materials before a lack of materials causes idle time Also, the subsidiary ledger can include columns for recording quantities ordered, so that management can have easy access to information about materials on order Ex 18–9 Work in Process Factory Overhead Materials 64,950 250 65,200 Ex 18–10 a Materials Accounts Payable 1,632,200 b Work in Process Factory Overhead Materials 1,617,600 13,500 1,632,200 1,631,100 c Fabric Balance, June $ 32,400 June purchases 547,300 Less: June requisitions 539,700 Balance, June 30 $ 40,000 Polyester Filling Lumber Glue $ 7,300 103,600 86,700 $ 24,200 $106,900 968,100 991,200 $ 83,800 $ 1,500 13,200 13,500 $ 1,200 Ex 18–11 Work in Process Factory Overhead Wages Payable 14,170 12,600 26,770 Ex 18–12 a Work in Process Factory Overhead Wages Payable 1,327.80 118.20 1,446.00 Supporting Calculations: Harvey Daniels Cedrick Price Dan Zhu Hourly Rate Labor Costs (Hourly rate × Hours) Direct Labor (sum of Indirect Job 111 Job 112 Job 113 job costs) Labor $11.50 13.25 11.40 $207.00 79.50 102.60 $172.50 92.75 148.20 $ 23.00 331.25 171.00 $ 402.50 503.50 421.80 $1,327.80 $ 57.50 26.50 34.20 $118.20 b The direct labor costs in the completed jobs would become part of finished goods inventory The direct labor costs in Job 113 would remain part of work in process inventory Ex 18–13 a Work in Process Factory Overhead Wages Payable 3,836 845 b Work in Process Factory Overhead 4,932 4,681 4,932 $3,836 ÷ $14 per hour = 274 hours 274 hours × $18 per hour = $4,932 Ex 18–14 a Factory 1: $19.00 per machine hour ($237,500 ÷ 12,500 machine hours) b Factory 2: $12.50 per direct labor hour ($112,500 ÷ 9,000 direct labor hours) c Factory 1: Work in Process Factory Overhead ($19.00 × 1,035) Factory 2: Work in Process Factory Overhead ($12.50 × 770) 19,665 19,665 9,625 9,625 d Factory 1—$435 debit (underapplied) ($20,100 – $19,665) Factory 2—$175 credit (overapplied) ($9,450 – $9,625) Ex 18–15 The estimated shop overhead is determined as follows: Shop and repair equipment depreciation Shop supervisor salaries Shop property tax Shop supplies Total shop overhead $ 16,900 95,200 19,200 12,200 $ 143,500 The auto parts and shop labor are direct to the jobs and are not included in the shop overhead rate The advertising and administrative expenses are selling and administrative expenses that are not included in the shop overhead but are treated as period expenses Ex 18–15 Concluded The estimated activity base is determined by dividing the shop direct labor cost by the direct labor rate, as follows: $490,000 = 35,000 hours $14 per hour The predetermined shop overhead rate is: $143,500 = $4.10 per direct labor hour 35,000 Ex 18–16 a Estimated annual operating room overhead: $399,000 Estimated operating room activity base, number of operating room hours: Hours per day Days per week Weeks per year (net of maintenance weeks) Estimated annual operating room hours × × 50 2,100 Predetermined surgical overhead rate: $399,000 = $190 per hour 2,100 hours b LeVar Wilson’s procedure: Number of surgical room hours Predetermined surgical room overhead rate Procedure overhead c 2.5 × $190 $ 475 Actual hours used in January Predetermined surgical room overhead rate Surgical room overhead applied, January Actual surgical room overhead incurred, January Overapplied surgical room overhead (credit bal.) 170 × $190 $ 32,300 31,800 $ 500 Ex 18–17 a Finished Goods Work in Process b Cost of unfinished jobs at March 31: Balance in Work in Process at March Add: Direct materials Direct labor Factory overhead Less: Jobs finished during March Balance in Work in Process at March 31 248,200 248,200 $ 15,700 84,700 63,200 92,100 $255,700 248,200 $ 7,500 Ex 18–18 a Work in Process Factory Overhead Materials 18,900 620 b Work in Process Factory Overhead Wages Payable 4,130 6,740 c 7,434 Work in Process Factory Overhead 19,520 10,870 7,434 Predetermined overhead rate: $2,520 ÷ $1,400 = 180% or $1,080 ÷ $600 = 180% Direct labor cost × Predetermined factory overhead rate: $4,130 × 180% = $7,434 d Finished Goods Work in Process * $10,220 + $4,880 10 15,100* 15,100 Prob 18–1B Product Costs Period Costs Direct Materials Direct Labor Factory Overhead Selling Administrative Cost Cost Cost Cost Expense Expense a b c d e f g h i j k l m n o p q r s t u v w x y z X X X X X X X X X X X X X X X X X X X X X X X X* X X * Paint may be considered indirect material if it is deemed to be an insignificant part of a boat’s cost Often, however, the paint will be sufficiently significant and measurable to be treated as direct material 25 Prob 18–2B a Materials Accounts Payable 226,150 b Work in Process Factory Overhead Materials 197,120 4,580 c Work in Process Factory Overhead Wages Payable 127,400 59,700 d Factory Overhead Selling Expenses Administrative Expenses Accounts Payable 83,500 51,000 36,400 e 226,150 201,700 187,100 170,900 Factory Overhead Selling Expenses Administrative Expenses Prepaid Expenses 3,600 950 700 Factory Overhead Depreciation Expense—Office Equipment Depreciation Expense—Store Equipment Accumulated Depreciation—Fixed Assets 15,200 11,100 1,900 g Work in Process Factory Overhead 170,100 h Finished Goods Work in Process 485,600 i 476,200 f Cost of Goods Sold Finished Goods 26 5,250 28,200 170,100 485,600 476,200 Prob 18–3B a Materials Accounts Payable 140,600 b Work in Process Factory Overhead Materials Wages Payable 243,000 52,000 c Factory Overhead Accounts Payable 5,600 d Factory Overhead Accumulated Depreciation—Machinery and Equipment 2,500 e Work in Process Factory Overhead (1,360 hours × $45) 61,200 f Finished Goods Work in Process 172,735 140,600 127,900 167,100 5,600 2,500 61,200 172,735 Computation of cost of jobs finished: Job No 601 No 602 No 603 No 605 Total Direct Materials $17,900 24,300 11,900 16,800 Direct Labor $16,300 22,300 10,500 15,700 Factory Overhead $10,035 11,025 6,750 9,225 Total $ 44,235 57,625 29,150 41,725 $172,735 g Accounts Receivable Sales 243,400 Cost of Goods Sold Finished Goods 143,585 Computation of cost of jobs sold: Job No 601 No 602 No 605 Total 27 $ 44,235 57,625 41,725 $ 143,585 243,400 143,585 Prob 18–3B Continued Work in Process (b) (e) 131,465 243,000 61,200 (f) Finished Goods (f) 172,735 304,200 172,735 (g) 143,585 29,150 Schedule of unfinished jobs: Job No 604 No 606 Balance of Work in Process, June 30 Direct Materials Direct Labor $32,100 18,500 $36,200 20,500 Factory Overhead $14,265 9,900 Total $ 82,565 48,900 $131,465 Schedule of completed jobs: Finished Goods, June 30 (Job 603) Direct Materials Direct Labor Factory Overhead Total $11,900 $10,500 $6,750 $29,150 28 Prob 18–3B Concluded This solution is applicable only if the P.A.S.S Software that accompanies the text is used KITCHEN AND BATH FIXTURES CO Trial Balance June 30, 2006 Account Number 120 130 140 150 171 210 220 410 510 610 Account Title Debit Accounts Receivable Finished Goods Work in Process Materials Accum Depr.—Mach & Equipment Accounts Payable Wages Payable Sales Cost of Goods Sold Factory Overhead 243,400 29,150 131,465 12,700 Totals 560,300 29 Credit 2,500 146,200 167,100 243,400 143,585 1,100 560,300 Prob 18–4B and JOB ORDER COST SHEET Customer Address Item Janice French 1244 Merchants Drive Columbus Reupholster couch and chairs Date Sept 1, 2006 Date wanted Oct 13, 2006 Date completed Oct 10, 2006 Job No 00–10–23 ESTIMATE Direct Materials Direct Labor Amount Summary Amount Amount 12 meters at $22 264 25 hours at $12 300 Direct materials Direct labor Factory overhead 264.00 300.00 180.00 Total 264 Total 300 Total cost 744.00 ACTUAL Direct Materials Mat Req No 3480 3492 Total Description meters at $22 meters at $22 Direct Labor Amount Time Ticket No 110 H143 198 H151 308 Total Description 15 hours at $12 13 hours at $12 Summary Amount 180 Item Direct materials Direct labor Amount 308.00 336.00 156 Factory overhead 201.60 336 Total cost 845.60 Comments: The direct materials cost exceeded the estimate by $44 because two meters of materials were spoiled The direct labor cost exceeded the estimate by $36 because an additional three hours of labor was used by an inexperienced employee 30 Prob 18–5B Supporting calculations: Aug Work in Process Direct Materials 65 $18,000 No 112 DL-18 100 35,000 No 113 DL-11 Job No Quantity Cost of Goods Sold Factory Overhead Total Cost Unit Cost $ 14,450 $12,300 $ 7,380 $ 52,130 $802.00 58 $ 46,516 22,400 19,500 11,700 88,600 $886.00 84 74,424 125 28,500 25,150 15,090 68,740 $549.92 100 54,992 $511.60 135 69,066 No 111 DL-8 No 114 SL101 No 115 SL-110 50 12,200 10,300 6,180 28,680 150 31,300 28,400 17,040 76,740 No 116 DL-14 70 16,800 15,800 9,480 42,080 $ 125,650 $111,450 Total Units Sold Direct Labor 535 $53,000 $66,870 $356,970 $244,998 A $128,150 Materials applied to production in August + indirect materials ($125,650 + $2,500) B $53,000 From table above and problem C $125,650 From table above D $111,450 From table above E $66,870 $111,450 × 0.6 and from table above F $286,210 ($52,130 + $88,600 + $68,740 + $76,740) G $244,998 From table above H $13,550 Wages incurred less direct labor applied to production in August ($125,000 – $111,450) August 31 balances: Materials $ 6,350 Work in Process $ 70,760* Finished Goods $ 41,212** Factory Overhead $ 2,820 Cr ($8,000 + $124,000 – $125,650) ($28,680 + $42,080, Job 114 and Job 116) ($286,210 – $244,998) overapplied ($2,000 + $13,550 + $2,500 + $46,000 – $66,870) * or ($53,000 + $125,650 + $111,450 + $66,870 – $286,210) ** Units in Job No Inventory Cost Job 111 Job 112 Job 113 Job 115 Total 16 25 15 $ 5,614 14,176 13,748 7,674 $ 41,212 31 Prob 18–6B Sales Cost of goods sold Gross profit Selling expenses: Advertising expenses Salespersons commissions Advertising design Total selling expenses Income from operations $6,840,000 969,000 $5,871,000 $2,000,000 684,000 600,000 3,284,000 $2,587,000 Supporting calculations: Sales: 38,000 units × $180 = $6,840,000 Cost of goods sold: 38,000 units × $25.50 = $969,000 Manufacturing cost per unit: Direct materials: Blank disk Packaging Manual Total direct materials Direct labor Factory overhead cost Total manufacturing cost per disk $ 5.00 7.00 12.00 $24.00 0.70 0.80* $25.50 *$1,200 ÷ 1,500 disks per hour Salespersons commissions: $6,840,000 × 10% = $684,000 Finished Goods balance, December 31, 2006: (40,000 units – 38,000 units) × $25.50 = $51,000 Work in Process, December 31, 2006: 600 units × ($24.00 + $0.80) = $14,880 The materials and copying have already been applied to the 600 units Only the direct assembly labor has yet to be applied for these units 32 SPECIAL ACTIVITIES Activity 18–1 Although Cheryl may appear to have technically complied with company policy, her computation of the cost of the lumber is unethical The Statement of Ethical Conduct for Practitioners of Management Accounting and Financial Management requires that Cheryl avoid all actual or apparent conflict-of-interest situations Thus, although it is appropriate for Cheryl to take advantage of Kenwood’s policy of allowing employees to purchase materials at cost, she should have had someone else (such as her supervisor) determine the amount that she owed for the lumber Clearly, selecting the lowest price has opened the door for criticism Activity 18–2 The objectives of managerial accounting and financial accounting are different; therefore, the vice-president’s statement is very incomplete In one sense, the statement may be true at only very high levels in the organization For example, the division manager may be evaluated on the basis of financial accounting profit Thus, the divisional manager would be evaluated by central management in nearly the same way that central management is evaluated by shareholders Lower in the organization, the financial concerns of the stockholder begin to diverge significantly from the day-to-day operating decision needs of the manager As such, the statement becomes very inaccurate the closer one gets to the actual operations Operational performance measures will focus on cost, quality, delivery time, equipment availability, inventory levels, scrap, waste, and efficiency This list is much broader and more detailed than the financial statement numbers provided to the stockholders The stockholders’ interest in profit is related to increasing shareholder value Managers must increase long-term shareholder value by engaging in strategies that enhance people, product, and processes in the delivery of value to customers These strategies can be measured by both financial and nonfinancial means Therefore, it is not surprising to see a much broader set of objective and subjective measures used internally in the organization to guide strategy and operations 33 Activity 18–3 Wendy’s bill has a number of points that should be considered Some of the points, with the appropriate argument, are identified below a The trip back to the shop resulted in a $35 labor charge Wendy should argue that the whole hour should not be billed The hour is the result of stocking out of a circuit board on the truck The circuit board should have been with the repair person There was a board for the previous customer However, since only one was stocked, the repair person had to go back to the shop The trip back to the shop was nonproductive time that should not have been directly charged to Wendy but should be part of In-Tune’s overhead cost to all customers In other words, Wendy should not be responsible for this mistake b The overtime premium should not have been charged to Wendy What if Wendy was the first appointment in the morning? If so, then there would be no overtime premium It’s only random misfortune that Wendy was the last client of the day and therefore received the overtime premium Add to this the fact that the overtime would not have been necessary without the trip back to the shop, and the conclusion is that Wendy should not be directly charged for overtime The overtime premium should be part of In-Tune’s overhead charged to all clients equally Wendy should be charged the overtime only if the decision for overtime was caused by or required by Wendy Thus, the labor portion of the bill should only be $30 + $25 + $25 = $80 There are other parts of the bill that should not be in dispute  The materials storage and handling charge is a normal charge of maintaining a parts inventory for the benefit of clients that need parts  The fringe benefits and overhead added to the hourly rate are both reasonable The fringe benefit attaches directly to the direct labor Fringe benefits are just another form of compensation The overhead must be covered by all customers Therefore, including overhead in the hourly rate is the most logical method of covering these costs  The additional charge for the first hour is also reasonable The first hour charge covers the costs of transit, which are directly attributable to making a home visit Wendy requires a home visit, so Wendy should be responsible for the costs of making the visit If Wendy brought the TV to the shop, this cost would not be incurred 34 Activity 18–3 Concluded Cost Direct Materials Circuit board Storage and handling Straight-time labor Fringe benefits* Overhead Vehicle depreciation and fuel Overtime premium Direct Labor Overhead X X X X X X X *Could be considered overhead Activity 18–4 There appear to be two or three trends Starting with the most obvious: a There appears to be a strong “Friday effect.” The unit cost on Friday increases dramatically, then falls on Monday Apparently the workforce is preparing early for the weekend b There also appears to be a general increasing trend in the unit cost Every Friday effect is larger than the previous Friday Much the same can be said about the other days of the week c It’s hard to tell, but there may also be a “within week” trend The unit cost appears to increase gradually from Monday through Thursday, before jumping on Friday At the very least, Mondays are the best operating days, while Fridays are the worst There are a number of further pieces of information that should be requested a First, it would be good to verify these trends with some other products This trend is probably not product-related but related generally to the day of the week This would mean that the trend should be apparent in the other products b The data should be sorted by shift and by employee It’s possible that the effect is stronger on one shift than on another or that just a few employees are responsible for the effect It may not be prevalent in the general population of workers 35 Activity 18–4 Concluded c The Friday–Monday phenomenon is likely related to the workforce, but the same cannot be said about the larger increasing trend over the four weeks It could be caused by any number of factors A good first look would be to isolate materials costs to see if these are contributors How much of the effect is labor and how much is material should be verified It’s possible that the general increase in cost over time is the result of loss of machine tolerances Thus, more and more material is being required to produce a unit of product d Has there been any significant change in supervisors or crucial employees that may explain this effect? e Have prices increased gradually for the raw materials? Activity 18–5 The engineer is concerned that direct labor is not related to overhead consumption because direct labor is a small part of the cost structure Apparently, the company has replaced labor with expensive machine technology and support This, of course, represents more factory overhead Just because the direct labor is “designed out” of the product will not mean that this overhead will magically disappear More likely, the direct labor hours will be replaced by machine-related factory overhead Thus, the factory overhead goes up while the activity base (direct labor) goes down Hence, the factory overhead rate will go up Since each direct labor hour now has $1,000 of factory overhead, small mistakes in the direct labor time estimates can have a large impact on the estimated cost of a product This is very critical If the company underestimates the direct labor content by a small amount, it will underbid and win the job Unfortunately, the job will turn out to have less profitability than expected because the price is smaller than it should be If the company overestimates the labor time, it will overbid the job Thus, it will lose out to competitors who bid more accurately This puts the company into a lose-lose situation when such small labor time errors have such large dollar impacts on the final cost estimate The engineer’s concern is valid The company should consider replacing its direct labor time activity base with one that more accurately reflects its present resources If the company is now highly automated, then machine hours may be a much more reasonable activity base 36 Activity 18–6 Ted should record the debits for factory wages as a debit to Work in Process The factory wages are product costs that must be accumulated in the cost of producing the product Eventually, these wage costs will become part of finished goods inventory and cost of goods sold when the gift items are sold Likewise, the depreciation should be recorded as a debit to Factory Overhead The overhead is then applied to production work in process Like the wages, the depreciation will also eventually become part of the finished goods inventory and cost of goods sold when the gift items are sold Thus, both the wages and depreciation will end up on the income statement as cost of goods sold, not as individual expenses The reason is because the accountant wants to match revenues and costs Costs that are accumulated in the manufacture of products not become expenses until the items are sold Until that time, the costs are capitalized as inventory If these costs were expensed immediately, the income for the firm would be understated for the period to the extent that there were any increases in the work in process or finished goods inventories Amy would not be concerned about immediately expensing administrative wages and depreciation because the benefits received from these costs are not product costs Instead, these costs benefit a period of time Thus, these costs should be expensed for the period 37 Activity 18–7 Note to Instructors: Consider having the teams compete for the most examples Have half the class the pizza restaurant and the other the copy shop, and compare results Some examples that may be offered by the students are the following: Copy and Graphics Shop Cost Paper Graphic designer wages Manager salary Lease cost of copy machine Coupon costs Advertising Packaging (bags and boxes) Ink Repair costs Property taxes Store depreciation Cashier salary Building heat and A/C Copy machine operator wages Covers Computer depreciation Brochures Direct Materials Direct Labor Overhead Selling Expenses X X X X X X X X X X X X X X X X X 38 Activity 18–7 Concluded Pizza Restaurant Cost Ingredients Cook wages Manager salary Depreciation on equipment and fixtures Coupon costs Advertising To-go boxes Disposable plates, utensils, cups Nondisposable plates, utensils, cups Repair costs Property taxes Store depreciation Cashier salary Beverage Building heat and A/C Salad ingredients Handbills Delivery person wages Power costs for ovens Direct Materials Direct Labor Overhead Selling Expenses X X X X X X X X X X X X X X X X X X X In service businesses, such as those above, the distinction between direct labor and overhead will not always be clear 39 ... 167,100 243,400 143,585 1,100 560,300 Prob 18 4B and JOB ORDER COST SHEET Customer Address Item Janice French 1244 Merchants Drive Columbus Reupholster couch and chairs Date Sept 1, 2006 Date wanted... estimate by $36 because an additional three hours of labor was used by an inexperienced employee 30 Prob 18 5B Supporting calculations: Aug Work in Process Direct Materials 65 $18, 000 No 112 DL -18. .. 8,480 6,840 11,300 5,535 20 27,020 Prob 18 4A and JOB ORDER COST SHEET Customer Address Item Danzel Bishop 1900 Peachtree Atlanta Reupholster couch and chair Date June 10, 2006 Date wanted July