Voltus Communications, a manufacturer of communications equipment, uses a job costing system. Manufacturing overhead is applied...
Voltus Communications, a manufacturer of communications equipment, uses a job costing system. Manufacturing overhead is applied based on machine hours and it uses a predetermined overhead rate with budgeted overhead of $3,600,000 for the year and 80,000 machine hours.
Voltus uses a financial year of 1 July 2018 to 30 June 2019 and all the activities for the year have been carried out. Summarised details for period 1 July 2018 to 31 May 2019 and for June 2019 follow. Jobs B12- 008,K12-009 and K12-011 were completed during June 2019 .All completed jobs except K12-009 have been sold by 30 June 2019.
| Jobs in process at 31 May 2019 | |
| Job numbers | Balance at 31 May 2019 |
| B12-008 | $263,000 |
| K12-009 | 163,000 |
| K12-011 | 0 |
| L15-005 | 0 |
| L15-006 | 0 |
| Total | 426,000 |
| Work carried out during June 2019 | |||
| Job numbers | Direct material | Direct labour | Machine hours |
| B12-008 | $2,500 | 13,500 | 300 |
| K12-009 | 14,000 | 36,000 | 1,000 |
| K12-011 | 71,800 | 85,100 | 1,400 |
| L15-005 | 118,700 | 55,000 | 2,500 |
| L15-006 | 78,000 | 50,400 | 800 |
| Totals | $285,000 | $240,000 | 6,000 |
| Actual Manufacturing Overhead incurred | 1July 2018 -31 May 2019 | During June 2019 |
| Indirect material | $375,000 | $27,000 |
| Indirect labour | 1,035,000 | 90,000 |
| Utilities | 735,000 | 66,000 |
| Depreciation | 1,155,000 | 105,000 |
| Total overhead | $3,300,000 | 288,000 |
| Other information | ||
| 1 July 2018 – 31 May 2019 | During June 2019 | |
| Raw Material purchases * | $2,895,000 | $294,000 |
| Direct labour cost | 2,535,000 | 240,000 |
| Machine hours | 73,000 | 6,000 |
| Account balances 1 July | |
| Raw Material Inventory | $315,000 |
| Work in Process Inventory | 180,000 |
| Finished Goods Inventory | 375,000 |
| Account balance 30 June 2019 Raw Material Inventory | $255,000 |
*Raw material purchases and raw material inventory consist of both direct and indirect materials
Required:
1.Outline the different methods that could be used to dispose of the overapplied or underapplied overhead and explain which method would be preferred in the current
2. Determine the balance in the finished goods account at 30 June
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