Problem: Terry Furniture Company refinishes and reuphosters furniture. Terry 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 unnumbered job 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 veriances 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 June 1, 2010, an estimate of $1,087.80 for reuphostering two chairs and a couch was given to Ted Austin. The estimate was based on the following data:
On June 4, the chairs and couch were picked up from the residence of Ted Austin, 409 Patterson St., Vienna, with a commitment to return them on August 5. The job was completed on August 2.
The related materials requistions and time tickets are summarized as follows:
Instructions:
1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer.
2. Assign number 10-110 to the job, record the costs incurred, and complete the job order cost sheet. Comment on the reasons for the variances between actual costs and estimated costs. For this purpose, assume that two meters of materials were spoiled, the factory overhead rate has been proved to be satisfactory, and an inexperienced employee performed the work.