Question - At the beginning of 2014, Ace Company estimated the following costs to produce one unit of product: 5 pounds of direct material costing $2 per pound; and, 1.5 hours of direct labor costing $12 per hour. Ace also estimated annual factory overhead totaling $400,000, and 10,000 direct labor hours to be worked during the year. Job lot #112, containing 400 identical units, was completed and sold during June of 2014. Job lot #112 required 2,050 pounds of direct material costing $4,050, and 620 hours of direct labor costing $7,800. At the end of 2014, Ace determined total factory overhead to have been $410,000, and direct labor hours worked to have been 9,800.
(a) What was the budgeted cost of job lot #112?
(b) What is the "normal" cost of job lot #112?
(c) What is the "prime" cost of job lot #112?
(d) What is the "actual" cost of job lot #112?
(e) Distinguish "normal" and "actual" cost?
(f) Prepare the adjusting entry needed to reconcile the difference between normal and actual cost related to job lot #112?
(g) Why was the adjusting entry needed?