Elegant Mosaics restores antique stained glass windows....

Elegant Mosaics restores antique stained glass windows. Regardless of the job, there is always some breakage or improper cuts. This scrap can be sold to amateur stained glass hobbyists. The following estimates are made in setting the predetermined overhead rate for 2001 : $$ \begin{array}{llr} \text { Overhead costs other than breakage } & & \$ 128,600 \\ \text { Estimated cost of scrap } & \$ 8,800 & \\ \text { Estimated sales value of scrap } & \underline{(2,400)} & 6.400 \\ \quad \text { Total estimated overhead } & & \underline{\$ 135,000} \end{array} $$ Elegant Mosaics expects to incur approximately 15,000 direct labor hours during 2001 . One job that Elegant Mosaics worked on during 2001 was a stained glass window of a family crest; the job took 63 hours. Direct materials cost $$\$ 420$$; direct labor is invoiced at $$\$ 20$$ per hour. The actual cost of the scrap on this job was $$\$ 55$$; this scrap was sold for $$\$ 18$$. a. What predetermined overhead rate was set for 2001? b. What was the cost of the family crest stained glass window? c. What journal entry is made to record the cost and selling value of the scrap from the family crest stained glass window?

Elegant Mosaics restores antique stained glass windows. Regardless of the job, there is always some breakage or improper cuts. This scrap can be sold to amateur stained glass hobbyists. The following estimates are made in setting the predetermined overhead rate for 2001 :
$$
\begin{array}{llr}
\text { Overhead costs other than breakage } & & \$ 128,600 \\
\text { Estimated cost of scrap } & \$ 8,800 & \\
\text { Estimated sales value of scrap } & \underline{(2,400)} & 6.400 \\
\quad \text { Total estimated overhead } & & \underline{\$ 135,000}
\end{array}
$$
Elegant Mosaics expects to incur approximately 15,000 direct labor hours during 2001 .
One job that Elegant Mosaics worked on during 2001 was a stained glass window of a family crest; the job took 63 hours. Direct materials cost $$\$ 420$$; direct labor is invoiced at $$\$ 20$$ per hour. The actual cost of the scrap on this job was $$\$ 55$$; this scrap was sold for $$\$ 18$$.
a. What predetermined overhead rate was set for 2001?
b. What was the cost of the family crest stained glass window?
c. What journal entry is made to record the cost and selling value of the scrap from the family crest stained glass window?

Key Concepts

Journal Entry for Scrap Transactions

This concept refers to the recording of financial transactions related to scrap materials. It involves making journal entries that capture both the cost associated with scrap generated during production and the revenue when the scrap is sold. This accounting treatment ensures that the job cost reflects accurate material usage and that any gains on scrap sales are properly recognized.

Application of Overhead Costs

Once the predetermined overhead rate is established, it is applied to a job based on the actual amount of the allocation base used by that job, such as labor hours. This allows companies to assign an appropriate portion of overhead to each job, ensuring that products or services are priced to cover both direct and indirect costs.

Scrap Accounting

Scrap accounting involves identifying and recording the costs associated with defective or excess materials that are sold or disposed of separately from the main production costs. This concept ensures that the costs of waste materials do not distort the cost of the final product while capturing any revenue that might be generated from their sale.

Predetermined Overhead Rate

This concept involves estimating total overhead costs for a period and then dividing by a chosen activity base (such as direct labor hours) to create a rate that is applied to individual jobs. The predetermined overhead rate is used to assign overhead costs to products or jobs before the actual costs are known, helping in planning and cost control.

Job Order Costing

Job order costing is a system where costs are tracked for each individual job or project, including direct materials, direct labor, and allocated overhead. This system helps in determining the total cost of a specific job and is vital in industries where jobs are unique and distinct from one another.

Transcript

00:01 So this question says that girls glass works make glass flinges for scientific use and material cost costs one dollar per flinch and the glass bowlers are paid a wage of $28 per hour.

00:22 The wage is $28 per hour and a glass blower blows 10 slinges per hour.

00:40 Now the fixed manufacturing cost for flinges, fixed manufacturing costs are $28 ,000 for the period.

00:50 Now the period costs, which is manufacturing costs, associated with the flinges are manufacturing costs or $10 ,000 per period and they are fixed.

01:08 Now the question says first of all, graph the fixed variable cost and total manufacturing cost for flinges using units on the x -axis.

01:25 So we're going to do that first.

01:27 The x -axis will be number of units and the one -axis will represent the manufacturing cost of the fixed variable and total manufacturing cost.

01:36 So the graph is going to look like what i'm about to draw.

01:48 So the number of flinges will be here and the total manufacturing cost to be here.

01:59 And we're going to start with 0, 5 ,000 and 10 ,000.

02:07 Then we're going to fill this all the way to 60 ,000.

02:29 So now the graph will have a fixed cost line.

02:34 From the question, it says it's 28 ,000, so it should be right here.

02:40 And this is the fixed cost line and then the variable cost line will go like this and this is the variable cost line while the total manufacturing cost line would go like this and it is a total manufacturing cost line so this is what the graph should look like the x -axis represents the number of units number of flinges ranges the wire access represents the manufacturing cost and the fixed cost is 28 ,000 as we can see but the period cost of 10 ,000 are not included in the production cost the variable cost for material is one dollar per flinch and the variable cost for manufacturing for direct manufacturing products is 3 .80 per flinch so that's it now moving on to the next question assume gailies last work manufactures and sells 5 ,000 flinges this period.

04:17 Its competitor, flora, flux, sells flinges $10 each, can gaily sell below flora's price and still make a profit on the flinges.

04:31 So the total cost per flinge for the product of company g would be calculated by adding the manufacturing cost per flinges.

04:44 And period cost for flingedge so total cost would be by adding the manufacturing cost plus period cost of the company g will be total cost perflinge total cost by fling should be equals to $3 .80 plus $28 ,000 divided by $5 ,000 plus $10 ,000 divided by and this is equal to 3 .80 plus 5 .60 plus 2 .00 so the total cost per plane should be $11 .40.

05:40 Now moving on the selling price of company f so this is what this is for company g g g g g gileys on glasswork.

05:55 Now i'm going to find company f which is flores flats so the selling price of company f is $10 per flinch and the total cost per flinch for company g is $11 .40 per flinch now the company g cannot sell a flinch for $10 to keep a selling price less than a selling price of company f because they cannot make a profit on the flinges...

Please give Ace some feedback