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Warren’s Sporting Goods Store sells a variety of sporting goods and clothing. In a back room, Warren’s has set up heat transfer equipment to personalize T-shirts for Little League teams. Typically, each team has the name of the individual player put on the back of the T-shirt. Last week, Shona Kohlmia, coach of the Terrors, brought in a list of names for her team. Her team consisted of 12 players with the following names: Mary Kate, Kayla, Katie, Tara, Heather, Emma, Kimberleigh, Jennifer, Dayna, Elizabeth, Kyle, and Wendy. Shona was quoted a price of $0.60 per letter. Chip Russell, Warren’s newest employee, took Shona’s order and worked on the job. He selected the appropriate letters, arranged the letters in each name carefully on a shirt, and heat-pressed them on. When Shona returned, she was appalled to see that the names were on the front of the shirts. Jim Warren, owner of the sporting goods store, assured Shona that the letters could easily be removed by applying more heat and lifting them off. This process ruins the old letters, so new letters must then be placed correctly on the shirt backs. He promised to correct the job immediately and have it ready in an hour and a half. Costs for heat transferring are as follows: Shona’s job originally took one hour and 12 minutes of direct labor time. The removal process goes more quickly and should take only 30 minutes. Required: 1. What was the original cost of Shona’s job? 2. What is the cost of rework on Shona’s job? Assume that Chip failed to ask whether the names should be placed on the back or the front of the shirts. How should the rework cost be treated? 3. Now assume that Shona had mistakenly told Chip to put the names on the front of the shirts. In an effort to keep his customer happy, Jim suggested that Shona pay only for the new letters and the firm would pay for the labor cost. How much did Jim charge Shona in addition to the orginal price of the job?

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 5, Problem 31P
Textbook Problem
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Warren’s Sporting Goods Store sells a variety of sporting goods and clothing. In a back room, Warren’s has set up heat transfer equipment to personalize T-shirts for Little League teams. Typically, each team has the name of the individual player put on the back of the T-shirt. Last week, Shona Kohlmia, coach of the Terrors, brought in a list of names for her team. Her team consisted of 12 players with the following names: Mary Kate, Kayla, Katie, Tara, Heather, Emma, Kimberleigh, Jennifer, Dayna, Elizabeth, Kyle, and Wendy. Shona was quoted a price of $0.60 per letter.

Chip Russell, Warren’s newest employee, took Shona’s order and worked on the job. He selected the appropriate letters, arranged the letters in each name carefully on a shirt, and heat-pressed them on. When Shona returned, she was appalled to see that the names were on the front of the shirts. Jim Warren, owner of the sporting goods store, assured Shona that the letters could easily be removed by applying more heat and lifting them off. This process ruins the old letters, so new letters must then be placed correctly on the shirt backs. He promised to correct the job immediately and have it ready in an hour and a half.

Costs for heat transferring are as follows:

Chapter 5, Problem 31P, Warrens Sporting Goods Store sells a variety of sporting goods and clothing. In a back room, Warrens

Shona’s job originally took one hour and 12 minutes of direct labor time. The removal process goes more quickly and should take only 30 minutes.

Required:

  1. 1. What was the original cost of Shona’s job?
  2. 2. What is the cost of rework on Shona’s job? Assume that Chip failed to ask whether the names should be placed on the back or the front of the shirts. How should the rework cost be treated?
  3. 3. Now assume that Shona had mistakenly told Chip to put the names on the front of the shirts. In an effort to keep his customer happy, Jim suggested that Shona pay only for the new letters and the firm would pay for the labor cost. How much did Jim charge Shona in addition to the orginal price of the job?

1.

To determine

Calculate the original cost of S job.

Explanation of Solution

Job order costing: Job order costing is one of the methods of cost accounting under which cost is collected and gathered for each job, work order, or project separately. It is a system by which a factory maintains a separate record of each particular quantity of product that passes through the factory. Job order costing is used when the products produced are significantly different from each other.

Calculate the original cost of S job.

ParticularsAmount ($)
Direct materials (a)$33.75
Direct labor (b)9.60
Overhead (c)4.80
Total original cost$48.15

Table (1)

Working notes:

  1. (a) Calculate the direct materials.

Direct materials=Number of letters×Cost for each letters=75×$0

2.

To determine

Calculate the rework cost and explain the treatment for this rework cost.

3.

To determine

Calculate the cost that Person J charged from Person S in addition to the original price of the job.

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Chapter 5 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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