GARRET`S CAR REPAIR SHOP -- Part One - 1ob Order Costing

Facts:
Joe Garret started a car repair business specializing in European cars. Joe uses a job order cost system, which he has designed to suit his requirements.
The Iollowing procedures were established by Joe to help him keep proper records and control the operations in the repair shop:
1. The customer will be attended by the manager (Joe) to discuss the nature oI the repair job.
2. The manager will assign the repair job to an available mechanic on duty.
3. The manager will enter the repair job in a register assigning a sequential job number to each job.
4. The manager will start a job cost sheet by Iilling in the blanks as appropriate.
5. The mechanic will careIully inspect the car and, iI necessary, consult with the manager to diagnose the problem.
6. AIter getting approval Irom the manager, the mechanic will order needed parts Irom the parts department using a multi-copy requisition Iorm.
7. The parts department will send the needed part(s) to the repair shop aIter noting the cost oI the part(s) requisitioned on the requisition Iorm.
8. One copy oI the requisition Iorm will be sent to the manager who will enter the amount charged Ior the part(s) on the job cost sheets in the column designated Ior parts.
9. The second copy oI the requisition will go to the inventory clerk Ior updating oI the parts inventory records.
10. The mechanic will note the time that work started on a job time ticket. When the job is completed, he will note the time oI completion and the total number oI hours on the
11. The ticket will then be given to the manager. For incomplete jobs, one copy oI the time ticket will remain on the windshield oI the car and one is sent to the manager.
12. Upon receipt oI the time ticket, the manager will calculate the cost oI labor at the hourly rate oI: $2900
13. Upon receipt oI the time ticket, the manager will calculate the overhead cost as the Iollowing percentage oI labor cost: 063
14. The manager then enters these costs in the Job Cost sheets Ior each separate job.
15. InIormation Irom the materials requisitions and the Time Slip sheets is entered into the appropriate job cost sheet.
16. On September 5, the Iollowing jobs were started: Job #s 187-192. By the end oI the day, Job #s 188 and 192 were completed.
17. For the completed jobs, the customer was charged the Iollowing percentage above the cost oI the job: 033
Price Parts List
BGF 012543 $600
CCT 876904 $683
LLx 120066 $130
llC 337763 $440
PCS 116343 $180
1C 009977 $120
vC 112343 $60
S18 364309 $93
vZx 673099 $731
vCx 239870 $880
Required: Using the provided Materials Requisition Slips, Parts Price List, and Time Slips, complete the Job Cost sheets Ior each Job started on September 5.
For the two completed jobs, please complete each Job Sheet Iully to include the bottom portion summarizing the cost to date and the Gross ProIit and Gross ProIit .
Req. # 970925-1 Deliver to: Dan Req. # 970925-2
Date: September 5 Charge to: 188 Date: September 5
Stock No. Qty. Unit cost TotaI Cost Stock No. Qty. Unit Cost TotaI cost
XCV 239870 1 VZX 675099 2
PVC 112543 1 PTQ 009977 3
STR 564309 1
Totals Totals
Deliver to: Liz Req. # 970925-3 Deliver to: James Req. # 970925-4
Charge to: 189 Date: September 5 Charge to: 190 Date: September 5
Stock No. Qty. Unit Cost TotaI Cost Stock No. Unit Cost TotaI Cost
FFG557765 3 FFG 557765 2
HOS 116543 1
Totals Totals
Req. # 970925-5 Deliver to: Liz Req. # 970925-6
Charge to: 191 Date: September 5 Charge to: 192 Date: September 5
Stock No. Qty. Unit Cost TotaI Cost Stock No. Qty. Unit Cost TotaI Cost
BGF 012543 1 CCT 876904 2
EEX 120066 1
Totals Totals
Charge to: 187...
GARRET'S CAR REPAIR GARRET'S CAR REPAIR
MATERIALS REQUISITION SLIP MATERIALS REQUISITION SLIP
Deliver to: Dan_____
GARRET'S CAR REPAIR GARRET'S CAR REPAIR
GARRET'S CAR REPAIR GARRET'S CAR REPAIR
MATERIALS REQUISITION SLIP MATERIALS REQUISITION SLIP
MATERIALS REQUISITION SLIP MATERIALS REQUISITION SLIP
Deliver to: James
1lme SheeL uan 1lme SheeL Llz
!ob # Pours !ob # Pours
187 4 188 2
189 2 191 6
192 2
1oLal 8 1oLal
1lme SheeL !ames
!ob # Pours
188 4
190 3
192 1
1oLal
1lme SheeL LxLra
!ob # Pours
1oLal
!ob CosL SheeL !ob # 187
noL lor CusLomer Lyes lease
Source (le 1lme Sllp or MaL 8eq) arLs ulrecL Labor Cverhead
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
CosL of CompleLed (ln rocess) !ob
arLs 1oLal $
ulrecL Labor 1oLal $
Cverhead 1oLal $
1oLal CosL $
Cross roflL
CusLomer Charges $
CosL Lo compleLe $
Cross roflL $
Cross roflL (as of cusLomer charge amounL)
**** nC1L
noL all cells may be appllcable
use of cells wlll be dependenL on
facLs of each [ob
!ob CosL SheeL !ob # 188
noL lor CusLomer Lyes lease
Source (le 1lme Sllp or MaL 8eq) arLs ulrecL Labor Cverhead
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
CosL of CompleLed (ln rocess) !ob
arLs 1oLal $
ulrecL Labor 1oLal $
Cverhead 1oLal $
1oLal CosL $
Cross roflL
CusLomer Charges $
CosL Lo compleLe $
Cross roflL $
Cross roflL (as of cusLomer charge amounL)
**** nC1L
noL all cells may be appllcable
use of cells wlll be dependenL on
facLs of each [ob
!ob CosL SheeL !ob # 189
noL lor CusLomer Lyes lease
Source (le 1lme Sllp or MaL 8eq) arLs ulrecL Labor Cverhead
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
CosL of CompleLed (ln rocess) !ob
arLs 1oLal $
ulrecL Labor 1oLal $
Cverhead 1oLal $
1oLal CosL $
Cross roflL
CusLomer Charges $
CosL Lo compleLe $
Cross roflL $
Cross roflL (as of cusLomer charge amounL)
**** nC1L
noL all cells may be appllcable
use of cells wlll be dependenL on
facLs of each [ob
!ob CosL SheeL !ob # 190
noL lor CusLomer Lyes lease
Source (le 1lme Sllp or MaL 8eq) arLs ulrecL Labor Cverhead
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
CosL of CompleLed (ln rocess) !ob
arLs 1oLal $
ulrecL Labor 1oLal $
Cverhead 1oLal $
1oLal CosL $
Cross roflL
CusLomer Charges $
CosL Lo compleLe $
Cross roflL $
Cross roflL (as of cusLomer charge amounL)
**** nC1L
noL all cells may be appllcable
use of cells wlll be dependenL on
facLs of each [ob
!ob CosL SheeL !ob # 191
noL lor CusLomer Lyes lease
Source (le 1lme Sllp or MaL 8eq) arLs ulrecL Labor Cverhead
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
CosL of CompleLed (ln rocess) !ob
arLs 1oLal $
ulrecL Labor 1oLal $
Cverhead 1oLal $
1oLal CosL $
Cross roflL
CusLomer Charges $
CosL Lo compleLe $
Cross roflL $
Cross roflL (as of cusLomer charge amounL)
**** nC1L
noL all cells may be appllcable
use of cells wlll be dependenL on
facLs of each [ob
!ob CosL SheeL !ob # 192
noL lor CusLomer Lyes lease
Source (le 1lme Sllp or MaL 8eq) arLs ulrecL Labor Cverhead
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
CosL of CompleLed (ln rocess) !ob
arLs 1oLal $
ulrecL Labor 1oLal $
Cverhead 1oLal $
1oLal CosL $
Cross roflL
CusLomer Charges $
CosL Lo compleLe $
Cross roflL $
Cross roflL (as of cusLomer charge amounL)
**** nC1L
noL all cells may be appllcable
use of cells wlll be dependenL on
facLs of each [ob
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A 8
CarreLs alnL and 8ody Shop arL 1wo rocess CosLlng
!oe CarreL has had exLenslve experlence ln auLo palnL and body work and has a Lhrlvlng buslness 8ecause of Lhe quallLy of hls work and hls reasonable raLes
Lhere ls a long walLlng llsL of cusLomers all of Lhe Llme Slnce Lhe Llme requlred for body work and palnLlng exLends Lo several days and because every [ob
lnvolves Lhe same processes !oe uses a process cosL sysLem for Lhls segmenL of hls buslness ln Lhe alnLlng and ollshlng () ueparLmenL denLs are
removed Lhe body ls soldered and prlmer and palnL ls applled MaLerlals ln are added LhroughouL Lhe process used Lhe WelghLed Average meLhod
1he followlng lnformaLlon ls avallable for Lhe operaLlons of ln CcLober (MMaLerlal and CConverslon)
8eglnnlng Work ln rocess (Wl) (cars ln aL sLarL of monLh) 60 M and 60 C 130
Cars enLerlng Lhls monLh 640
1oLal cars Lo accounL for 770
number of cars fully processed and exlLlng Lhls monLh 380
Lndlng Wl (cars sLlll ln aL monLh end) 190
Lndlng Wl MaLerlal 60
Lndlng Wl Converslon 60
1oLal cars accounLed for (fully processed plus Lndlng Wl) 770
useful daLa
8eglnnlng Wl ulrecL MaLerlal cosL 310000 $
8eglnnlng Wl Converslon cosL 330000 $
CurrenL monLh ulrecL MaLerlal cosL 14220000 $
CurrenL monLh Converslon cosL 16780000 $
8equlred uslng Lhe nexL Lab (arL28eporL) prepare a cosL of producLlon reporL belng sure Lo compuLe Lhe cosL of compleLed cars and Lhe cosL of Lndlng Wl
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A 8 C u
arL 2 rocess CosLlng

CuanLlLy Schedule Cars

8eglnnlng Wl
Cars enLerlng
1oLal unlLs (cars) Lo accounL for
LqulvalenL
ulrecL MaLerlals
Cars compleLed
Lndlng Wl
MaLerlals from facLs
Converslon from facLs
1oLal unlLs (cars) accounLed for
CosL Lo accounL for ulrecL MaLerlal Converslon
CosL of 8eglnnlng Wl
CosLs lncurred Lhls perlod
1oLal cosL Lo daLe
LqlvalenL unlLs
WelghLed Avg per Lqulv unlL
CosLs accounLed for as follows
CosL of compleLed cars
CosL of Lndlng Wl
uM
Converslon
CosL accounLed for
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A 8 C u L l
CarreLs alnL and 8ody Shop arL 1hree Cv and lncremenLal Analysls
arL A Cv Analysls
alnLlng and ollshlng () ueparLmenL lnformaLlon per car palnLed (varlable Lxpenses)
Callons/car $/gallon 1oLal/car
varlable ulrecL MaLerlals (uM) 8 9000 $ 72000 $
Pours/car $/hour 1oLal/car
varlable ulrecL Labor (uL) 13 3000 $ 39000 $
uL hours/car $vCP/uL hour 1oLal/car
varlable Cverhead per Pour (vCP) 13 1300 $ 19300 $
llxed cosL of per year 36000000 $
AmounL charged cusLomer for palnLlng a car 240000 $
ueLermlne Lhe followlng
1 ConLrlbuLlon margln per car palnLed
2 number of cars needed Lo be palnLed Lo break even each year
3 uollar amounL of sales Lo break even for Lhe year
4 CompuLe Lhe number of cars needed Lo be palnLed Lo earn a proflL of 9300000 $
xx
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A 8
CarreLs alnL and 8ody Shop arL 1hree Cv and lncremenLal Analysls
arL 8 Speclal Cffer
!oe has recelved an offer from a used car dealershlp Lo palnL Lhe followlng number of cars for Lhem 330
1he normal annual volume of palnLlng cars aL !oes ls approxlmaLely 2030
1he regular cosL of palnLlng a car calculaLed based upon Lhls acLlvlLy level ls 114000 $
1hls cosL ls made up of Lhe followlng amounLs
ulrecL maLerlals per car 48000 $
ulrecL laber per car 33000 $
varlable overhead per car 18000 $
llxed overhead per car 18000 $
!oes regular prlce for a palnL [ob ls 240000 $
Speclal offer prlce from used car loL 93000 $
Lven Lhough Lhe offer ls less Lhan Lhe normal charge !oe ls undeclded abouL wheLher he should accepL Lhe order or noL lf Lhe new order ls accepLed Lhe normal
buslness wlll noL be affecLed and no addlLlonal flxed cosLs wlll be lncurred
Should !oe accepL Lhe offer?
lease show your calculaLlons below whlch wlll supporL your answer
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A 8
CarreLs alnL and 8ody Shop arL 1hree Cv and lncremenLal Analysls
arL C 8eLaln or replace equlpmenL
ln early !anuary !oe purchased a spray palnLlng booLh ln order Lo comply wlLh LA sLandards and pald Lhe followlng amounL 8300000 $
1he new spray palnLlng booLh has a useful llfe of Lhls number of years 3
1he new spray palnLlng booLh has a salvage value afLer Lhls number of years of 0
1he new spray palnLlng booLh wlll be depreclaLed uslng Lhe sLralghLllne meLhod
Annual operaLlng cosLs for Lhe new spray palnLlng booLh are 7300000 $
ShorLly afLer purchaslng Lhe new spray palnLlng booLh a salesperson vlslLed wlLh !oe and demonsLraLed a new spray palnLlng booLh wlLh Lhe same baslc
capablllLles as Lhe booLh he had [usL purchased 1hls booLh has Lhe followlng useful llfe ln years 3
1he new spray palnLlng booLh ls avallable now and wlll have Lhe followlng amounL each year ln operaLlng expenses 6300000 $
1he cosL of Lhe spray palnLlng booLh now belng consldered by !oe ls 11300000 $
1he salvage value of Lhe spray palnLlng booLh now belng consldered ls 0
lf Lhls newer spray palnLlng booLh ls purchased Lhe currenL spray palnL booLh can be sold for 3800000 $
8equlred uslng lncremenLal analysls deLermlne lf !oe should purchase Lhe new machlne Show your calculaLlons Lo supporL your answer
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A 8 C u
CarreLs alnL and 8ody Shop arL lour Cash 8udgeLlng SepLember and CcLober
lacLs for arL lour all parLs (Au)
varlous daLa SepLember CcLober
Sales revenue from dlfferenL servlces 12100000 $ 18300000 $
arLs purchases 4123000 $ 4330000 $
Salarles and wages 4330000 $ 4800000 $
Cverhead 2100000 $ 2773000 $
CLher expenses 3073000 $ 3000000 $
Some cusLomers pay cash aL Lhe Llme of dellvery of Lhe servlce whlle oLhers buy on accounL from !oe and pay ln varlous lnLervals
Cash sales monLhly are Lhe followlng percenLage 61
Sales on accounL monLhly are Lhe followlng percenLage (bad debLs are forLunaLely noL an lssue for !oe) 39
CollecLlons of sales on accounL occur as follows
ln Lhe monLh of sale Lhls percenLage ls collecLed 66
ln Lhe monLh followlng Lhe monLh of sale Lhls percenLage ls collecLed 30
ln Lhe second monLh followlng Lhe monLh of sale Lhls percenLage ls collecLed 4
aymenLs on purchases occur as follows
ln Lhe monLh Lhe purchase Lakes place Lhls percenLage ls pald ln cash 66
ln Lhe monLh afLer Lhe purchase occurred Lhls percenLage ls pald ln cash 34
1he oLher expenses lnclude Lhe followlng amounL of depreclaLlon on asseLs 703000 $
1he oLher expenses are pald (as approprlaLe) ln full each monLh
Salarles and wages are pald ln cash and ln full each monLh
Cverhead ls pald ln cash and ln full each monLh
CLher daLa lncludes Lhe followlng
CredlL sales ln !uly 4800000 $
CredlL sales ln AugusL 3700000 $
urchases ln AugusL 3900000 $
Cash balance aL Lhe end of AugusL 2330000 $
Mlnlmum deslred cash balance 300000 $
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A 8 C u L
CarreLs alnL and 8ody Shop arL lour Cash 8udgeLlng SepLember and CcLober
arL A 8equlred repare a Schedule of Cash CollecLlons from cusLomers
!uly AugusL SepLember CcLober
CredlL sales
Cash collecLed on sales (monLh of sale and LhereafLer)
1oLal CollecLlons from CusLomers
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A 8 C u
CarreLs alnL and 8ody Shop arL lour Cash 8udgeLlng SepLember and CcLober
arL 8 8equlred repare a Schedule of Cash aymenLs for urchases
AugusL SepLember CcLober
urchases
1oLal Cash aymenLs for urchases
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CarreLs alnL and 8ody Shop arL lour Cash 8udgeLlng SepLember and CcLober
arL C 8equlred repare a Cash 8udgeL for SepLember
8eglnnlng balance
Add
ueducL
Lndlng balance
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CarreLs alnL and 8ody Shop arL lour Cash 8udgeLlng SepLember and CcLober
arL u 8equlred repare a Cash 8udgeL for CcLober
8eglnnlng balance
Add
ueducL
Lndlng balance