Question

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Question 1 Answer all parts of this question. 6. Job 215 was started and completed during the year. What price would have been charged to the customer if the job required £15,000 in direct materials and £7.000 in direct labour costs and the company priced its jobs at 25% above cost la manufaclure? (4 marks) (Total - 25 marks) City Products operates a job-order cost system and applies overhead costs to jobs on the basis of direct materials used in production not on the basis of raw materials purchased). In computing a predetermined overhead rate at the beginning of the year, the company's cstimates were manufacturing overhead cost, f1.200,000, and direct matcrials to be used in production, £800,000. The company's inventory accounts at the beginning and end of the year were: Beginning Ending Raw Materials Work in progress Finished goods 80,000 200,000 560,000 80,000 160,000 700,000 The following actual costs were incurred during the year: 900,000 Purchase of direct raw materials Direct labour cost Manufacturing overhead 240,000 Indirect labour Property taxes Depreciation of equipment Maintenance Insurance Rent, building 300,000 104,000 520,000 210,000 18,000 300,000 1. Compute the predetermined overhead rate for the year. (4 marks) 2. Campule the amount of under or over-applied overhead for the vear. (4 marks) 3. Prepare a schedule of cost of goods manufactured for the year. (5 marks) 4. Compute the cost of goods sold for the year. Do not include any under-or over-applied overhead in your cost of goods sold figure. (4 marks) 5. What options are available for the disposing of under- or over-applied overhead? (4 marks) Page 2 of 6 Page 2 of 6 Page 3 of 6

Answer 1

1	Estimated manufacturing overhead cost	1,200,000
	Estimated direct material cost	800,000
	Predetermined overhead rate	150.00%
2	Actual manufacturing overhead costs
	Indirect labor	300,000
	Property taxes	104,000
	Depreciation of equipment	520,000
	Maintenance	210,000
	Insurance	18,000
	Rent, building	300,000
	Total actual costs	1,452,000
	Applied manufacturing overhead costs ($900,000 x 150%)	1,350,000
	Underapplied overhead	102,000
	Direct materials used in production:
	Raw materials inventory, beginning	80,000
	Add: Purchases of raw materials	900,000
	Raw materials available	980,000
	Deduct: Raw materials inventory, ending	80,000
	Raw materials used in production	900,000
3
	City Products
	Cost of Goods Manufactured
	Raw materials inventory, beginning	80,000
	Add: Purchases of raw materials	900,000
	Raw materials available	980,000
	Deduct: Raw materials inventory, ending	80,000
	Raw materials used in production	900,000
	Direct labor cost	240,000
	Manufacturing Overhead	1,452,000
	Total manufacturing costs	2,592,000
	Beginning work in process inventory	200,000
	Total work in process inventory	2,792,000
	Ending work in process inventory	160,000
	Cost of goods manufactured	2,632,000
4	City Products
	Cost of Goods Sold
	Cost of goods manufactured	2,632,000
	Beginning finish goods inventory	560,000
	Cost of goods available for sale	3,192,000
	Ending finish goods inventory	700,000
	Cost of goods sold	2,492,000