Question:
At the starting of 2014, Ace Company estimated the subsequent costs to produce one unit of product: 5 pounds of direct material costing $2 per pound; and, 1.5 hours of direct labor costing $12 per hour. Ace also evaluated annual factory overhead totaling $400,000, and 10,000 direct labor hours to be worked during the year. Job lot 112, containing 400 identical units, was sold and completed during June of 2014. Job lot 112 required 2,050 pounds of direct material costing $4,050, and 620 hours of direct labor costing $7,800. At the end of 2014, Ace evaluate total factory overhead to have been $410,000, and direct labor hours worked to have been 9,800.
(a) What was the budgeted cost of job lot 112?
(b) What is the "normal" cost of job lot 112?
(c) What is the "prime" cost of job lot 112?
(d) What is the "actual" cost of job lot 112?
(e) Differentiate "normal" and "actual" cost?
(f) Write the adjusting entry needed to reconcile the difference between actual and normal cost related to job lot 112?
(g) Why was the adjusting entry needed?