in the fileBudgeted total manufacturing overhead$450,300 Budgeted total direct labour hours 22515...

Question

in the fileBudgeted total manufacturing overhead$450,300 Budgeted total direct labour hours 22515 During March, the firm began two production jobs: job number T81, consisting of 55 trombones  job number C40, consisting of 110 cornets.   Account Name1 March Balance Cash$7,000 Accounts Receivable$15,000 Prepaid Insurance$6,400 Raw material Inventory$149,000 Manufacturing supplies inventory$500 Work in process Inventory$62,000 Finished Goods Inventory$186,000 Accumulated depreciation: building and equipment$102,000 Accounts payable$13,000 Wages payable$8,000 Required:  9. Provide the management team of Sami Design Ltd with the issues could occur applying the current traditional manufacturing overhead costing system. 10. Analyse and describe the benefits of replacing Activity Base Costing (ABC). The following requisitions were filed on 5 March: Sami Design Ltd manufactures Sami musical instruments for use by high school students. The company uses a job costing system in which  manufacturing overhead is applied on the basis of direct labour hours. The company’s budget for the current year included the following  predictions:  The events of March are described as follows:  1000 square metres of rolled Sami sheet metal were purchased on credit for $6000 400kilograms of Sami tubing were purchased on credit for $4000 Assignment question Electricity costs incurred during March amounted to $1800 The invoices for these costs were received, but the bills were not paid in March. — requisition number 112: 250 square metres of Sami sheet metal @ $5 per square metre (for job number T81)  — requisition number 113: 1000 kilograms of Sami tubing @ $10 per kilogram (for job number C40) — requisition number 114: 10 litres of valve lubricant @ $1 per litre.  — All Sami used in production is treated as direct material. Valve lubricant is an indirect material.  An analysis of labour time sheets revealed the following labour usage for March:  — direct labour: job number T81, 600 hours @ $14 per hour  — direct labour: job number C40,700 hours @ $14 per hour — indirect labour: general factory clean-up, $3000 — indirect labour: factory supervisory salaries, $7000 Depreciation of the factory building and equipment during March amounted to $10000 Rent paid in cash for warehouse space used during March was $1000 Half the trombones in job number T81 were sold on credit during March for $600 each. The 1 March balances in selected accounts are as follows: March council rates and property taxes on the factory were paid in cash, $2000 Insurance cost covering factory operations for March was $2700 The insurance policy had been prepaid in February. Costs of salaries and on-costs for sales and administrative personnel paid in cash during March amounted to $6000 Depreciation on administrative office equipment and space amounted to $3000 Other selling and administrative expenses paid in cash during March amounted to $1000 Job number T81 was completed in March.  6. Prepare a schedule of cost of goods manufactured for March.  7. Prepare a schedule of cost of goods sold for March.  8. Prepare an income statement for March. 1. Calculate the company’s predetermined overhead rate for the current year. 2. Complete job cost sheet for job number T81.  3. Prepare journal entries to record the events of March.  4. Set up ledger accounts, and post the journal entries made in requirement 3.  5. Calculate the overapplied or underapplied overhead for March. Prepare a journal entry to close this balance into cost of goods sold.

Suvrat · Accepted Answer

Required:
1. Calculate the company’s predetermined overhead rate for the current year.
Ans – 
	Particulars
	Amount/Hours/Rate
	Budgeted total manufacturing overhead (A)
	$450,300
	Budgeted total direct labour hours (B)
	22,515
	Predetermined O/H rate (A/B)
	20
2. Complete job cost sheet for job number T81.
Ans – 
	Job Cost Sheet for Job T81
	Particulars
	Quantity/hours
	Rate
	Amount ($)
	Direct Material
	250
	5
	1,250
	Direct Labour
	600
	14
	8,400
	Manufacturing
Overhead
	600
	20
	12,000
	 
	Total Cost
	
	21,650
3. Prepare journal entries to record the events of March.
Ans – 
	S.No.
	Particulars
	Debit ($)
	Credit ($)
	a
	Raw Material
	          6,000 
	 
	 
	To Accounts payable
	 
	           6,000 
	 
	(Being Sami sheet purchased)
	 
	 
	b
	Raw Material
	          4,000 
	 
	 
	To Accounts payable
	 
	           4,000 
	 
	(Being Sami tubing purchased)
	 
	 
	c
	Work in Process
	        11,250 
	 
	 
	To Raw Material 
	 
	        11,250 
	 
	(Being raw material transferred 
to WIP) = (250 * $5 + 1000*$10)
	 
	 
	d
	Manufacturing Overhead
	                 10 
	 
	 
	To Manufacturing Inventory
	 
	                 10 
	 
	(Cost of valve lubricant)
	 
	 
	e
	Work in Process
	        18,200 
	 
	 
	Manufacturing Overhead
	        10,000 
	 
	 
	To Wages Payable
	 
	        28,200 
	 
	(Being Direct labour wages and 
indirect labour wages payable)
	 
	 
	f
	Work in Process
	        26,000 
	 
	 
	To Manufacturing Overhead
	 
	        26,000 
	 
	(Being applied manufacturing O/H)
	 
	 
	g
	Manufacturing Overhead - Depreciation
	        10,000 
	 
	 
	To Acc Dep - Building & Equipment
	 
	        10,000 
	 
	(Being depreciation charged)
	 
	 
	h
	Manufacturing Overhead - Rent
	          1,000 
	 
	 
	To Cash
	 
	           1,000 
	 
	(Being rent paid)
	 
	 
	i
	Manufacturing Overhead - Electricity
	          1,800 
	 
	 
	To Accounts payable
	 
	           1,800 
	 
	(Being electricity bill for March Payable)
	 
	 
	j
	Manufacturing Overhead - Taxes
	          2,000 
	 
	 
	To Cash
	 
	           2,000 
	 
	(Being taxes paid)
	 
	 
	k
	Manufacturing Overhead - Insurance
	          2,700 
	 
	 
	To Prepaid Insurance
	 
	           2,700 
	 
	(Being Insurance expense booked)
	 
	 
	l
	Selling & Admin Expenses - Salaries
	          6,000 
	 
	 
	To Cash
	 
	           6,000 
	 
	(Being salaries paid)
	 
	 
	m
	Selling & Admin Expenses - Depreciation
	          3,000 
	 
	 
	To Acc Dep - Building & Equipment
	 
	           3,000 
	 
	(Being depreciation charged)
	 
	 
	n
	Selling & Admin Expenses - Other
	          1,000 
	 
	 
	To Cash
	 
	           1,000 
	 
	(Being other selling expenses paid)
	 
	 
	o
	Finished Goods
	        21,650 
	 
	 
	To Work In Progress
	 
	        21,650 
	 
	(Being WIP t/f to Finished Goods)
	 
	 
	p
	Accounts receivable
	        16,800 
	 
	 
	To Sales
	 
	        16,800 
	 
	(Being 40 trombones sold @$900 each)
	 
	 
	q
	Cost of Goods Sold
	        11,022 
	 
	 
	To Finished Goods
	 
	        11,022 
	 
	(Cost of 28 trombones sold)
	 
	 
4. Set up ledger accounts, and post the journal entries made in requirement 3.
Ans – 
	Cash
	
	
	
	
	
	Particulars
	JE Ref
	Debit ($)
	Particulars
	JE Ref
	Credit ($)
	To Balance b/d
	 
	          7,000 
	Manufacturing Overhead - Rent
	h
	          1,000 
	 
	 
	 
	Manufacturing Overhead - Taxes
	j
	          2,000 
	 
	 
	 
	Selling & Admin Expenses - Salaries
	l
	          6,000 
	 
	 
	 
	Selling & Admin Expenses - Other
	n
	          1,000 
	
	
	
	
	
	
	Accounts Rec.

Budgeted total manufacturing overhead$450,300 Budgeted total direct labour hours 22515 During March, the firm began two production jobs: job number T81, consisting of 55 trombones job number C40,...

Answer To: Budgeted total manufacturing overhead$450,300 Budgeted total direct labour hours 22515 During March,...

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