Data Analysis Project

record the transactions related to this job in the

company’s accounting records.

Part 1 The following step-by-step requirements will guide you

through the entire job costing process. The documents
you will encounter in this case are normally completed
Custom Fabric Ventures is a small company that electronically rather than manually. In addition, these
produces fabric-based wardrobe accessories (such as, documents often interface with each other
handbags, scarves, and headbands) and home electronically in order to transfer data in real-time,
accessories (such as placemats, pillows, and window eliminate tedious calculations, and prevent errors.
treatments). The company keeps a limited number of However, the underlying process is the same regardless
popular items in stock, but primarily produces custom of whether the company uses electronic or manual
orders. Customers are able to choose from a wide documents.
selection of styles, sizes, and fabrics for each type of
Req. 1: Before the year began, Custom Fabric Ventures
product. Most of the company’s customers are small
estimated the following costs for the year:
boutiques, home décor shops, and home-decorators
who serve clientele with discerning tastes. As a result, See Excel file: Estimated Annual Costs
customers expect high-quality products.
First, fill in the missing costs. Then, calculate the
The sales staff of Custom Fabric Ventures has just company’s predetermined manufacturing overhead
received the following order: rate, assuming the company uses direct labor hours as
its allocation base:
See Excel file: Customer Order Form
Req. 2: To realize maximum efficiency and meet
Due to its popularity, the Black and White Handbag
management’s desired level of stock, how many Black
(BW14293) is normally a stock item. However, the
& White handbags should be produced in Job
handbag is currently out of stock. Rather than
114?___________
producing only enough units to fill Katie’s order,
management would like to produce a job (Job 114) that Req. 3: The production engineers have given you the
is large enough to fill Katie’s order and replenish stock. materials requirements for each Black & White
The fabric used for this job can be stacked four layers handbag. Assume that no efficiencies in materials can
deep for cutting, while still maintaining the quality and be achieved by producing more than one unit per batch.
precision of the cut. Therefore, the company is able to Complete the Bill of Materials for Job #114 found
realize some economies of scale by producing the below. Be sure to include number of units being
handbags in multiples of 4. Management would like to produced in the Job as well as the total quantity
produce enough units in this job to have a minimum of needed of each direct material.
30 and a maximum of 35 handbags left in stock after
Katie’s order has been filled. See Excel file: Bill of Materials

Your primary task is to determine the cost of Req. 4: The production engineers have also given you
producing Job 114 so that you can calculate the gross the production labor requirements for each individual
profit on the sale to Katie’s Boutique. As part of this bag produced, assuming one bag is produced at a time:
process, you will be required to schedule production,
Cutting time: 30 minutes per bag;
purchase any raw materials that aren’t currently in
Sewing time: 70 minutes per bag;
stock, requisition materials for the job, and complete Ironing time: 8 minutes per bag
the job cost record. You will also be asked to consider
relevant management and accounting issues and Since each bag must be sewn and ironed individually, no
sewing and ironing labor efficiencies can be achieved by
producing larger batch sizes. Recall, however, that buy a little more than what you need. This is not a
fabric can be stacked for cutting purposes, such that the problem for your company, as it can always use large
material for four bags can be cut in the same amount of pieces of leftover material for other jobs. Custom
time it would take to cut one individual bag. Compute
Fabric Ventures also has a standing contract with
the estimated labor time requirement for producing
Job 114. another vendor to produce clothing for their line of
children’s toys. Thus, small fabric remnants can always
TOTAL hours required for Job 114: _________ be used for the toy clothing line.

Req. 5: Use the estimated labor time requirement to See Excel file: Suppliers
schedule production of Job 114, including the start and
end dates. Assume the plant will already be operating
at full capacity every day while completing Jobs 111,
See Excel file: Purchase Order #1
112, and 113. Also assume that only 4 direct laborers
with the needed skill set will be available for this job.
These hourly employees are only allowed to work a
maximum of 8 hours per day so that the company can See Excel file: Purchase Order #2
avoid paying overtime premiums.
Req. 10: Assume shipments of all supplies arrive on
See Excel file: Production Schedule 10/9. Your receiving personnel have checked the
receipts against the Purchase Order and Invoice, and
Req. 6: In addition to the direct materials shown on have noted no discrepancies in the ordered quantities
the Bill of Materials, what indirect materials might be or prices. Since the company keeps perpetual
used in the factory while Job 114 is being produced? inventory records, update the Raw Materials Records
List at least 2 items for the materials received and the new balance in
stock. Update both the physical quantities and costs.
Req. 7: What types of production equipment will be
The company uses FIFO as its inventory flow
needed for producing Job #114? List at least 5 items.
assumption.
Req. 8: Consult the Raw Materials records to determine
the types and quantities of materials you currently have See Excel file: Raw Materials Records
in stock. Determine which types of materials you need
Req. 11: Assume for a moment that the Raw Materials
to purchase for Job 114 and how much of each you’ll
Records given to you represent a complete list of the
need.
raw materials carried by the company. If you were to
See Excel file: Raw Materials Records look at the Balance Sheet at the close of business on
Oct. 9, what balance would be shown for Raw
List the materials that need to be purchased, along Materials Inventory? (Show the total balance and how
with the quantity of each needed: you arrived at it.) $__________________

Req. 9: Complete the purchase orders (supplier, date Req. 12: The scheduled start date for the job has
needed, item number, quantity, cost per yard, total arrived. In order to begin production the materials for
cost, total for the whole order) assuming you are only the job are needed in the plant. Production would like
buying what you need for this job, and no other jobs. to requisition all needed materials at one time.
Your purchasing agent will need to check with your Complete the Materials Requisition (fill in the date,
authorized suppliers (JoAnne Fabrics and Hancack Job #, and quantity needed) so that the inventory
Fabrics) to determine the current sales price of the storeroom personnel know the quantities and types of
materials. No shipping is charged on purchases orders material to pick.
over $50. Note: Both suppliers only allow you to order
in increments of 5 yards at time, so you may have to See Excel file: Materials Requisition
Req. 13: The storeroom personnel correctly pick the Req. 19: The handbags ordered by Katie’s Boutique are
direct materials and send them to production. shipped out on 10/14. Update the job cost record.
Complete the cost information on the Materials What is the new balance in Finished Goods Inventory
Requisition above, assuming the company uses FIFO as for this item?
its inventory flow assumption. Start a Job Cost Record
for Job 114. Record the direct materials used by the See Excel file: Job Cost Record
job by recording the materials requisition number and
Req. 20: Calculate the gross profit on the sale to
the total cost of materials requisitioned.
Katie’s Boutique:
See Excel file: Job Cost Record
Req. 21: Assume for a moment that Katie’s Boutique
has found an overseas manufacturer that would charge
Req. 14: Update the Raw materials records for the
$45 per unit for the same handbag. Should Custom
materials that were picked in Req. 13.
Fabric Ventures match the price of this competitor?
If you were to look at the Balance Sheet at the end of Briefly explain your answer.
the day, what balance would be shown for Raw
Req. 22: Would the cost of Job 114, as reported on the
Materials Inventory? Calculate the total balance and
job cost record, have been different had the company
show how you arrived at it. $_______________
used “direct labor cost” as the MOH allocation base,
Req. 15: Obtain the Labor Time Records for the week to rather than “direct labor hours”?_____ If so, by how
determine how much direct labor cost to assign to Job much would the total job cost have differed?_______
114. Record the direct labor used by the job by
Req. 23: Would the cost of Job 114, as reported on the
recording the labor time record numbers, hours
job cost record, have been different had the
worked, and total DL cost on the job cost record.
company’s production equipment been 6 years old,
See Excel file: Labor Time Records rather than 3 years old? If so, by how much would the
total job cost have differed? ________

See Excel file: Job Cost Record Req. 24: As a manager, you always need to be thinking
about how to decrease costs without sacrificing the
Req. 16: Calculate the amount of manufacturing quality of your products and services. Generate three
overhead to allocate to Job 114. Show your specific ideas this company could possibly implement
calculations on the job cost record. for decreasing costs on similar jobs in the future.
Note: General answers such as “spend less on labor”
See Excel file: Job Cost Record or “be more efficient” will not count. You must
generate specific, realistic and actionable
Req. 17: Complete the job cost record. Determine the
recommendations managers could take to possibly
total job cost as well as the cost of each handbag in
decrease production costs related to similar jobs in the
the job.
future.
See Excel file: Job Cost Record

Req. 18: The handbags have been moved out of the

factory and into the finished goods warehouse to await
shipment. Before the handbags are completed, the job
cost records served as a basis for valuing which
inventory account on the balance sheet? After the
handbags are completed, the job cost records serve as
a basis for valuing which inventory account?