Question

QUESTION 2 Citysites Sdn. Bhd. uses a job-order costing system. On Sept 1, Materials and Supplies Control account had a balance of $28.000, whilst the Finished Goods (Job X10) balance on the same date was $15,000. Work in process as at Sept 1 consists of 2 jobs. Details as follows: Job Materials ($) Labour (S) Overhead (S) XII 5.200 2,300 3,300 X12 8,700 3,200 5,775 Direct labour cost (S) incurred and machine hours for the month of Sept: Job Direct Labour Cost (S) Machine Hours X11 1,900 140 X12 2.300 180 X13 2,500 260 Materials (including supplies) purchased during the month amounted to $13,700. During the month of Sept, materials issued to Job X11 were $7,500 whilst Job X12 was issued materials of $3,600. Job X13 was started during the month and received materials amounting to $8,300. No other jobs were worked on during the month. Closing balance of Materials and Supplies Control account on 30 Sept was $22,150. Jobs X11 and X13 were completed during Sept and transferred to Finished Goods. Job X10 was sold for $25,000 and Job X13 was sold for $28.800 in Sept. Other information: • Indirect labour amounted to $1,300 • Depreciation of plant equipment amounted to $5,500 • Electricity for the plant amounted to $2,200 • Factory Rental amounted to $3,800 Factory overhead is allocated on the basis of machine hours. Total factory overhead is estimated to be $1,980,000 for the current year. Citysites estimates total machine hours for the year are 72,000 hours. Citysites transfers all under / over allocated overheads to the Cost of Goods Sold at the end of each month. Required (a) Determine the predetermined overhead rate per machine hour for the year. (1 mark) (b) Determine the Indirect Materials used. (1 mark) (c) Prepare all necessary journal entries. (7 marks) (d) Compute the cost of Job X12. (1 mark) (e) Determine the under / over allocation of overhead for the month of Sept. Prepare the journal entry to record the under over allocation of overhead. (2 marks)

Answer 1

a) Predetermined overhead rate based on machine hour Total manufacturing overheads $1,980,000 Machine hours 72,000 $27.50 per MH b) Opening balance, Sep 1 Add: Purchases Cost of material available for use Less: Issue to Production $28,000 $13,700 $41,7001 $19,400 $22,300 $22,150 $150 Less: Closing stock , Sep 30 Indirect material used Date Credit Debit $13,700 $13,700 $19,400 $1501 $19,550 $6,700 $1,300 $8,000 $15,950 580*$27.5 $15,950 General Journal Material Inventory Accounts payable (To record material purchase on account) Work in process Manufacturing overhead Material inventory (To record material issued) Work in process Manufacturing overhead Wages payable (To record wages) Work in process Manufacturing overhead (To record manufacturing overhead applied) Manufacturing overhead Accumulated depreciation Cash (To record manufacturing overhead incurred) Finished goods Work in process (To record cost of finished goods completed) Cash Sales (To record sale of Job X10 and X13) Cost of goods sold Finished goods (To record COGS of Job X10 and X13) $11,500 $5,500 $6,000 $42,000 $42,000 $53,800 $53,800 $32,9501 $32,950 d) $17,675 Total Cost of Job X12 Opening Work in process Add: Current period cost Direct material Direct labour Manufacturing overhead applied Total Cost $3,600 $2,300 $4,950 $28,525 e) Indirect material Indirect labor Depreciation Factory Electricity Factory rent Actual manufacturing overheads $150 $1,300 $5,500 $2,200 $3,800 $12,950 Manufacturing overhead applied Over-applied overheads $15,950 $3,000 Credit Debit $3,000 General Journal Manufacturing overheads Cost of goods sold (To record over-applied overheads to COGS) $3,000 Working notes: Job Cost sheet X13 X11 $10,800 X12 $17,675 $7,500 $1,900 Opening Work in process Add: Current period cost Direct material Direct labour Manufacturing overhead applied Total Manufacturing Cost to account for Closing Work in process Cost of goods manufactured $3,850 $24,050 $0 $24,050 $3,600 $2,300 $4,950 $28,525 $28,525 $0 $8,3001 $2,500 $7,150 $17,950 $0 $17,950 Machine hours Machine hour rate Manufacturing overhead applied X11 140 $27.50 $3,850 X12 180 $27.500 $4,950 X13 260 $27.50 $7,150