Assessment I â?? Job Order CostingInstructions20 points as follows: 8 points for journal entries, 5

Assessment I â?? Job Order CostingInstructions20 points as follows: 8 points for journal entries, 5

Assessment I – Job Order CostingInstructions20 points as follows: 8 points for journal entries, 5 points for the Cost of Goods Manufactured Schedule,5 points for the Income Statement, 2 points for discussion of Mrs. Carter’s request. I reserve the right toadd up to 3 points extra credit for professional submission which, in my opinion, exceed expectations.Submit by Friday, February 5 at 11:55 PM on an excel spreadsheet to “Assessment 1 – Lambeth CabinetsDropbox†in course materials in mycourses. (The drop box closes at 11:55 PM and nothing beyond11:55PM will be accepted.) Do not email the case to me – Searching emails fee of 5 points deducted.You may work in groups of up to three – submit one excel spreadsheet per group. YOU MAY NOTDROP THIS ASSESSMENT. I reserve the right to interview any group or student before determining afinal grade.Read the Harvard/Darden Lambeth Cabinets Case and complete the followingPrepare all journal entries relating to the production and sale of product (Raw materials, DirectMaterials, Factory Overhead, and Cost of Goods Sold). There is one correction to the case – on the top ofpage 2 – Total direct materials charged to all jobs should be $1,775 not $1,175. The supplies inventoryreported in the case is separate from manufacturing. The supplies issued to production from the suppliesinventory account are used in production as noted in the case.1. The company uses normal costing to value it’s inventory with under/over applied closed toCOGS. In addition to the information provided in the case assume the company sells it’s scrapwood and cardboard to a recycling company. During the period it received $175 for the scrap.The scrap recovery had no impact on how the overhead was applied to the jobs in the case. Thescrap is not related to a specific job and benefits the overall plant overhead. Also assume job A5consists of 5 individual cabinets and each cabinet used exactly the same amount of directmaterial and direct labor. On the last day of the month, after all the work was finished and OHapplied on job A5 for the month, someone left one of the windows open and 2 of the cabinetsreceived extensive water damage. The 2 cabinets were set aside in damaged inventory and willbe sold for $145 each. The damage was considered abnormal damage. The 2 damaged cabinetshave not yet been sold. Note: Damaged inventory is not considered good ending finished goodsinventory (only good production is considered ending inventory) in the calculation of Cost ofGoods Sold. The company records abnormal losses as a separate line item in Cost of Goods Sold.2. You do not have to submit your T accounts. Prepare a Cost of Good Manufactured Schedule andIncome Statement. Assume sales for the month = collections from customers = $16,475. Checkdigit is Cost of Goods Manufactured = $9090.3. I also want you to comment on Mrs. Carter’s situation as this is something we covered in Acctg103 and demonstrates your understanding of cost behavior. Specifically I want you to identifywho you think is correct (Jack Jr. or Walworth) regarding the pricing of Mrs. Carter’s order giventhe fact that business is slow. You must support your position.Jack Lambeth, a master cabinetmaker, owned and operated a shop where he sold custommade cabinets. At the beginning of September, he had no outstanding debts, and thefollowing amounts were on his books:1. Raw-materials inventory, $2,1502. Supplies inventory, $6203. Work-in-process inventory, $5,6504. All other assets as of September 1, $16,890During the month, Lambeth’s woodworking crew finished hobs A-3, A-4, and A-6, butdid not finish A-5. Job A-7 was started but not finished during September. Overhead costs(pertaining primarily to equipment and shop depreciation, cleaning supplies, andinsurance) were applied to every job at the end of the month unless the job was finishedduring the month, in which case overhead was applied when the job was finished.During September, the following direct-materials and direct-labor costs were incurred:Other important financial factors in September were as follows:1. Raw materials costing $1,675 were purchased during the month.2. Supplies costing $580 were purchased, of which $490 were used and thustransferred to the manufacturing-overhead account.3. Total increases to the labor-general-ledger account were $5,460 (apparently,$2,000 of indirect-labor costs were charged).4. General and administrative expenses for the month were $3,420.5. Collections received from customers on jobs A-3, A-4, and A-6 amounted to$6,125, $8,600, and $1,750, respectively, for a total of $16,475.6. At the end of the month, Lambeth Custom Cabinets had no outstanding debts.While Lambeth was reviewing the September data, he became concerned about themanufacturing-overhead variance (MOV). Because he never wanted to lay off anemployee, the MOV was always large in months when business was slow. (Lambethassigned idle workers to general cleanup and repair work, and charged their wages toindirect labor.) Of course, Lambeth realized why the MOV was so large. What he wasworried about, however, was Mrs. Carter.Mrs. Carter, a neighbor, had stopped by the shop one day in early September to get aprice on some cabinets she wanted built. Lambeth’s son, Jack Jr., spoke with her. Jack Jr.was working in the shop while on summer vacation between his first and second year ofgraduate business school. He studied Mrs. Carter’s plans, and estimated the cost ofbuilding her cabinets to be $1,625. His job-estimation sheet showed the following:When Jack Jr. quoted a price of $1,900 ($1,625 cost plus $275 profit) to Mrs. Carter, shesaid that she could get the same thing built by Walworth Custom Kitchens for $1,500.Furthermore, she informed him, “I would throw the dumb economics books away beforeI would pay a penny more than $1,500 for book cabinets to store them.â€Jack Jr. simply told her that his best price was $1,900. He explained all about labor,materials, profit, overhead, and competitive capitalism. In addition, he told Mrs. Carterthat Walworth could not make money on a $1,500 price, and if Walworth was reallywilling to build the shelves for $1,500, she would be stealing from Mr. Walworth!Mrs. Carter was very angry when she left. Jack Jr. later told his father the whole story,and laughed as he said, “Heck, we can’t build stuff that costs $1,625 and sell it at a priceof $1,600, let alone $1,500, can we?†At the time, Lambeth did not think much about theincident, but he began to wonder whether Jack Jr. had learned anything at graduatebusiness school. Lambeth became especially concerned when he saw Bob Walworth, whosaid, “Mrs. Carter saved me last month.†Walworth had just delivered Mrs. Carter’s newcabinets, for which she paid $1,500. Lambeth wondered who was right: Jack Jr. orWalworth?Assignment1. Show, in a series of ledger accounts, the transactions for September (you may usethe T- accounts below).2. In the greatest detail possible, prepare balance sheets as of September 1 andSeptember 30 and an income statement for September (do not consider taxe

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