39Comparing job costs to managements expectations Ol Sol bui

39./Comparing job costs to management\'s expectations. Ol\' Sol builds to order and installs solar panels on commercial buildings. Ol\' Sol uses a job costing system. At the be- ginning of November, it had two jobs in proccss: the company had incurred costs of S2,000,000 on the Financial Towers job and S1,800,000 on the Hyatt Suite job as of November 1. Selected transactions for the month of November follow: 1. OI\' Sol did not incur any additional direct materials costs on the Financial Towers and Elyatrjobs-but did ncur dire TTmateriatsOSTSOTT TW o mewTObsTs·follows- Bloomfield Stadium, $1, 100,000 and Healthy Hospital, $600,000. 2. Ol\' Sol incurred direct labor costs on jobs as follows: Financial Towers, $1,300,000; Hyatt Suite, $850,000; Bloomfield Stadium, S1,500,000; and Healthy Hospital, $260,000. 3. It applied service overhead for November to jobs using an overhead rate of 70 per- 4. It completed the Financial Towers and Hyatt Suite jobs in Novembeir. had expected the cost of completed jobs to be as follows: cent of direct labor costs. Actual overhead for the month was S2,700,000. Ol\' Sol\'s management is concerned that costs are higher than anticipated. Managers Financial Towers: $4,000,000, when complete Hyatt Suite: $3,000,000, when complete Bloomfield Stadium: $2,500,000, as of November 30 Heaithy Hospital: $1,0S0,000, as of November 30

Solution

Financial Towers Job Hyatt Suite Job Particulars Amount Particulars Amount Opening Balance     20,00,000.00 Opening Balance    18,00,000.00 Direct Materials                          -   Direct Materials                          -   Direct labour     13,00,000.00 Direct labour       8,50,000.00 Service Overheads@70% on Direct Labour       9,10,000.00 Service Overheads@70% on Direct Labour       5,95,000.00 Total Job Costs     42,10,000.00 Total Job Costs    32,45,000.00 Management Expectation     40,00,000.00 Management Expectation    30,00,000.00 Difference       2,10,000.00 Difference       2,45,000.00 Variance in % 5.25% Variance in % 8.17% Acceptable Variance Acceptable Variance Bloomfield Stadium Healthy Hospital Particulars Amount Particulars Amount Opening Balance                          -   Opening Balance                          -   Direct Materials     11,00,000.00 Direct Materials       6,00,000.00 Direct labour     15,00,000.00 Direct labour       2,60,000.00 Service Overheads@70% on Direct Labour     10,50,000.00 Service Overheads@70% on Direct Labour       1,82,000.00 Total Job Costs     36,50,000.00 Total Job Costs    10,42,000.00 Management Expectation     25,00,000.00 Management Expectation    10,50,000.00 Difference     11,50,000.00 Difference           -8,000.00 Variance in % 46.00% Variance in % -0.76% Management should take care in incurring costs for this job Savings in costs   Particulars Amount Applied Overheads     27,37,000.00 Actual Overheads     27,00,000.00 Difference           37,000.00 Comments Over Applied