W3D1

Now that we have a better understanding of job costing, let’s take an example from our childhood entrepreneurial endeavors (neighborhood lawn mowing, babysitting, etc.). Imagine these products and services as businesses, in which you are the manager with several teenagers as your employees.
In your initial post, define the “jobs” in job costing. Explain how you would measure direct materials cost, direct labor cost, and compute predetermined overhead rates.
What are your actual manufacturing overhead costs, and why aren’t they traced to jobs, just as direct materials and direct labor are traced to jobs?
Give reasons why overhead might be under-applied or over-applied in a given year.
What factors should be considered in selecting a base to be used in computing the predetermined overhead rate? Why?
When you read the posts submitted by your peers, provide feedback explaining what you would have done differently. Ask for clarification regarding their definitions or decisions that seem unclear to you. Identify areas where you concur with their thinking.

Write at least 300 words 
Post at least two replies to either peers or the instructor  
Write at least 150 words per reply 

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Chad Watkins 
In junior high, a best friend and I started a neighborhood lawn care business that quickly grew out of proportion.  We started a business using g our parent’s lawn mowing equipment and advertising to mow yards for $20.  Upon starting our business, we had zero overhead and were able to provide an extremely affordable service.  The summer of our first year we quickly attained 17 loyal customers.  A weekly revenue of $340 to 2 junior high kids seemed like millions of dollars at the time.  For the next two years, we managed to gross over $12,000 in which we decided to save $10,000.  The turning point of our business was when my friend attained his driver’s license.  We purchased a commercial mower with our savings and initially using the family van with a trailer expanded in our third year of operation to service 55 yards.  At that point we increased our prices to $25-30 and also bought a trailer to launch a mulching service.  Over the next several years, when we graduated high school, our business expanded to the point that our annual revenue was approximately $220,000.  By this point we were running two full time three employee crews with over $60,000 of equipment equity including two trucks, two trailers, and four commercial mowers.
What was the secret to our success?  It was simply not having overhead.  Initially we started a business that was a pure profit revenue stream.  Additionally, we were able to undercut competitor’s prices because we could offer a comparable service at a much lower price.  At that point of our life, we did not have a family to support nor expenses such as a house payment, health insurance, or even a grocery bill.  We were much less dependent on a profit to cover the common expenses of life.  This enabled us to grow as a leading force in our five mile radius driving the competition out of our market.  Essentially, we acquired a monopoly and were able do so by operating with minimal overhead. 
In our business, our direct costs included equipment, yearly equipment maintence, insurance, and the garage rent for the trailer and equipment.  The variable costs included fuel.  The mixed cost in our model included labor because employees were hired at a fixed rate, but the hours worked were weather dependent and driven by need.  An allocation base is a measure such as direct labor-hours (DLH) or machine-hours (MH) that is used to assign overhead costs to products and services (Noreen, 2017).  Our business model was no different in the sense that our overhead was an allocation base dependent on labor hours worked at a direct labor cost.
References:
Noreen, E. (2017). Managerial Accounting for Managers (4th Edition). Mcgraw-Hill Education.

Kenneth Belin 
I would define “a job’ as a service to customers for monetary exchange. If I had to choose a neighborhood job, it would be racking leaves. This job would be seasonal because the leaves only fall once a year.
My direct material cost would be the equipment or tools that will be needed to complete the job, such as rakes, plastic bags, gloves, and maybe a wagon. My direct labor cost will be my employees that I hire to help get the jobs completed. Trying to compute the predetermined overhead cost will determine the weather and time of year. Most of our jobs would be done during the fall season when the leaves has fallen off the trees. (Noreen, 2016)
Some of the overhead cost will not be associated with raking leaves such as the transportation to get to each job, fuel for the transportation and keeping it serviced. These costs are not directly associated with raking leaves.
Overhead costs may vary and might be over implied because some yards may have more or less leaves. Which will mean less yards to rake or they weather may play a big factor on how many gets completed during that week.
Noreen, E. (2016). Managerial Accounting for Managers. (4th ed.). McGraw-Hill/Irwin.

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