Richard was looking back at the profitability of a few jobs from the prior year, wondering if more profit could have been generated. The executive team of this custom manufacturing shop tries to achieve gross margins near 50% for all of its projects. Each completed job that Richard examined was profitable when overhead costs were determined using the company's actual costing system. Still, since he didn't have those total job costs until the end of the year, he wondered if he could have built in a larger gross margin if he had been able to better estimate these total job costs sooner. Here is more detailed information on the three jobs Richard is reviewing: Job #45 Job #76 Actual DM costs Actual DL costs Applied MOH costs under actual costing Total costs Sales revenue Gross margin Gross margin percentage $4,100 2,550 16,575 23,225 $ 39,000 % In this manufacturing company, MOH is applied based on direct labor costs. $10,500 $14,900 12,700 8,400 82,550 54,600 105,750 77,900 182,000 If Richard had used normal costing instead of actual costing, what would the gross margin amount and percentage have been for each job? Assume the same selling prices would have been charged, and assume a budgeted MOH rate of $7/DL dollar would have been used. (Round percentages to 2 decimal places, e.g. 52.75%.)(b) Job #45 Job #76 Job #82 $ Job #82 % 117,000 $ %
Richard was looking back at the profitability of a few jobs from the prior year, wondering if more profit could have been generated. The executive team of this custom manufacturing shop tries to achieve gross margins near 50% for all of its projects. Each completed job that Richard examined was profitable when overhead costs were determined using the company's actual costing system. Still, since he didn't have those total job costs until the end of the year, he wondered if he could have built in a larger gross margin if he had been able to better estimate these total job costs sooner. Here is more detailed information on the three jobs Richard is reviewing: Job #45 Job #76 Actual DM costs Actual DL costs Applied MOH costs under actual costing Total costs Sales revenue Gross margin Gross margin percentage $4,100 2,550 16,575 23,225 $ 39,000 % In this manufacturing company, MOH is applied based on direct labor costs. $10,500 $14,900 12,700 8,400 82,550 54,600 105,750 77,900 182,000 If Richard had used normal costing instead of actual costing, what would the gross margin amount and percentage have been for each job? Assume the same selling prices would have been charged, and assume a budgeted MOH rate of $7/DL dollar would have been used. (Round percentages to 2 decimal places, e.g. 52.75%.)(b) Job #45 Job #76 Job #82 $ Job #82 % 117,000 $ %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Richard was looking back at the profitability of a few jobs from the prior year, wondering if more profit could have been
generated. The executive team of this custom manufacturing shop tries to achieve gross margins near 50% for all of its
projects. Each completed job that Richard examined was profitable when overhead costs were determined using the
company's actual costing system. Still, since he didn't have those total job costs until the end of the year, he wondered if
he could have built in a larger gross margin if he had been able to better estimate these total job costs sooner.
Here is more detailed information on the three jobs Richard is reviewing:
Job #45
Job #76
Actual DM costs
Actual DL costs
Applied MOH costs under actual costing
Total costs
Sales revenue
Gross margin
Gross margin percentage
Job #45
$4,100
$
2,550
%
16,575
23,225
39,000
In this manufacturing company, MOH is applied based on direct labor costs.
$10,500
12,700
82,550
105,750
If Richard had used normal costing instead of actual costing, what would the gross margin amount and percentage have
been for each job? Assume the same selling prices would have been charged, and assume a budgeted MOH rate of
$7/DL dollar would have been used. (Round percentages to 2 decimal places, e.g. 52.75%.)(b)
Job #76
182,000
$
Job #82
%
$14,900
8,400
54,600
77,900
117,000
$
Job #82
%
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