ACC 212 Help Needed

ACC 212 Help Needed

Cheng Furniture Company refinishes and reupholsters furniture. Cheng Furniture 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 unnumberedjob 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 September 3, 2014, an estimate of $3,050 for reupholstering a sofa and loveseat was given to John Jobs. The estimate was based on the following
data:

On September 6, the sofa and loveseat were picked up from the residence of John Jobs, 220 Apple Lane, Cupertino, CA, with a commitment to return it on October
31. The job was completed on October 28.

The relatedmaterials requisitions andtime tickets are summarized as follows:

Required:

Enter amounts as positive numbers.

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.

JOB ORDER COST SHEET
Customer John Jobs Date Sept. 3, 2014 Address 220 Apple Lane Date wanted Oct. 31, 2014 Cupertino, CA Date completed Oct. 28, 2014 Item Reupholster sofa and loveseat Job. No. ESTIMATE
Direct Materials	Direct Labor	Summary
	Amount		Amount		Amount
40 meters at $25		30 hours at $30		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	Amount
508	18 Meters at $ 25		H40	14 Hours at $ 30		Direct Materials
Direct Labor
510	25 Meters at $ 25		H43	20 Hours at $ 30		Factory Overhead
Total			Total			Total Cost

What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that three meters of
materials were spoiled, the factory overhead rate has been proved to be satisfactory, and an inexperienced employee performed the work.)

1. The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled. The direct labor cost exceeded the
   estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee.
2. Management didn’t provide enough direction to complete tasks on budget.
3. The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled.
4. 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.

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