Accounting for a Job-Order Cost System
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.
Required
a. Prepare job cost sheets for each of the five catering jobs.
b. Calculate income for the month of June.