Question

QUESTION 2 (25 Marks) The following cost data relate to the manufacturing activities of Leenette Enterprise during the most recent year: RM Manufacturing overbead costs incurred during the year: Property taxes 9,600 Factory utilities 10,600 Indirect labour 10,300 Depreciation factory 9,000 Insurance: factory 10,500 Other costs incurred during the year: Purchases of raw materials 56,000 Direct labour cost 87,000 Inventories: Begin raw materials 28.000 Ending raw material 29,000 Beginning work in process 16.000 Ending work in process 14,000 Begin finished goods 42,000 Ending finished goods 54,000 Additional Information: Indirect materials included in the manufacturing overhead incurred 3,000 The company applies manufacturing overhead job using a predetermined overhead rate based on direct-labour hours. At the beginning of the year, the estimated total manufacturing overhead cost was RM80,000 and direct labour hour is 16,000 hours. It was found that the actual direct labour hour is 11,000 hours. Required: a) Determine the predetermined overhead rate for the year (3 marks) b) Determine the manufacturing overhead applied to the job (2 marks) c) Compute the over/under applied overhead (4 marks)

Answer 1

Q2)
a) predetermined overhead rate for the year:
Estimated total manufacturing overhead = 80000
Estimated Direct Labor hour = 16000 hours
Overhead rate = 80000 / 16000 = RM 5 /DLH
b) Manufacturing overhead applied to the job = Actual DLH * predetermined overhead rate
Manufacturing overhead applied to the job = 11000 * RM 5/DLH = RM 55000
c) Over/under applied overhead:
Actual Manufacturing overhead incurred:
Property taxes	9600
Factory utilities	10600
Indirect Labor	10300
Factory depreciation	9000
Factory insurance	10500
Indirect materials	3000
Total actual overheads	53000
Over applied overhead = overhead applied - actual overhead = 55000 - 53000 = RM2000
d) Schedule of Cost of Goods Manufactured:			Amount RM
Opening WIP			16000
Raw materials:
OB	28000
add:Purchases	56000
Total available	84000
Less:CB	29000
Less:Indirect used	3000
Direct Raw Mat. Used		52000
Direct Labor		87000
Manuf. Overhead applied		55000
Total Manuf. Expenses			194000
Total Work in Process			210000
Less:Closing WIP			14000
Cost of Goods Manufactured			196000
e) Cost of Goods Sold:
	Amount RM
Beginning Finished Goods	42000
Plus: Cost of Goods Manufactured	196000
Goods available for sale	238000
Less: Ending Finished Goods	54000
Cost of Goods Sold	184000