Reference no: EM131920575

Problem

Maverick Wings, Inc. manufactures airplanes for use in stunt shows. Maverick's factory is highly automated, using the latest in robotic technology.

To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Maverick uses a job order costing system to accumulate product costs.

At the end of 2013, Maverick's accountants developed the following expectations for 2014 based on the marketing department's sales forecast:

Budgeted overhead cost		$1,095,000
Estimated machine hours		47,000
Estimated direct labor hours		8,000
Estimated direct materials cost		$1,520,000

Maverick's inventory count, completed on December 31, 2013, revealed the following ending inventory balances:

Raw Materials Inventory		$251,000
Work in Process Inventory		$625,000
Finished Goods Inventory		$760,000

The company's 2014 payroll data revealed the following actual payroll costs for the year:

Job Title		Number Employed		Wage Rate per Hour		Annual Salary per Employee		Total Hours Worked per Employee
President and CEO		1				$222,000
Vice president and CFO		1				$177,000
Factory manager		1				$40,600
Assistant factory manager		1				$31,100
Machine operator		5		$14.50				2,250
Security guard, factory		2				$21,000
Materials handler		2		$7.50				2,000
Corporate secretary		1				$36,100
Janitor, factory		2		$6				2,150

The following information was taken from Maverick's Schedule of Plant Assets. All assets are depreciated using the straight-line method.

Plant Asset		Purchase Price		Salvage Value		Useful Life
Factory building		$4,000,000		$150,000		20 Years
Administrative office		$650,000		$125,000		30 Years
Factory equipment		$2,000,000		$20,000		12 Years

Other miscellaneous costs for 2014 all paid in cash included:

Cost		Amount
Factory insurance		$12,100
Administrative office utilities		$6,000
Factory utilities		$30,300
Office supplies		$5,000

Additional information about Maverick's operations in 2014 includes the following:

•Raw materials purchases for the year amounted to $1,946,000. All purchases were on account.

•The company used $1,860,000 in raw materials during the year. Of that amount, 85% was direct materials and 15% was indirect materials.

•Maverick applied overhead to Work in Process Inventory based on direct materials cost.

•Airplanes costing $3,450,000 to manufacture were completed and transferred out of Work in Process Inventory.

•Maverick uses a markup of 80% to price its airplanes. Sales for the year were $6,570,000.
(Note: This transaction requires two journal entries.)

•All sales were on account.

Job 3827 was started and completed in 2014. The job required 800 machine hours, 200 direct labor hours, and $77,000 in direct materials to complete. What was the total cost of this job? Using Maverick's 80% markup, what sales price would be charged for this airplane? (Round answers to 0 decimal places, e.g. 345,000.)

Total Cost $

Sales Price $

If Maverick had chosen to use machine hours as its overhead application base, what would the rate have been in 2014? (Round answer to 2 decimal places, e.g. 2.45.)

Predetermined rate$

Machine hourLabour hour