Major Assignment ACFI2003 - Question 1 1a. Direct material...

Question 1
1a.
Working:
a. Direct labour paid = $18/hour
Direct labour hours worked in year 2 = 2,500
Direct labour cost = $18 x 2,500 = $45,000
b. Direct labour paid = $18/hour
Direct labour hours worked in year 2 = 3,200
Direct labour cost = $18 x 3,200 = $57,600
c. Predetermine rate = $135
Direct labour hours worked in year 2 = 2,500
Work-In-Process = $135 x 2,500 = $337,500
d. Predetermine rate = $135
Direct labour hours worked in year 2 = 3,200
Work-In-Process = $135 x 3,200 = $432,000
1b.
Working:
a. Direct labour paid = $18/hour
Direct labour hours worked in year 3 = 300
Total direct labour = $18 x 300 = $5400
b. Predetermine overhead rate =
Manufacturingoverhead
Actualdirect Labour hours
=
$ 7,531,500
55,000
AB20 AB25
Direct material cost
$ 275,000 $ 496,000
Direct labour cost
$ 45,000
a
$ 57,600
b
Manufacturing overhead
$ 337,500
c
$ 432,000
d
Beginning balance 657,500 985,600
Job AB25
Beginning Inventory $985,600
Direct Material
Inventory
58,000
Direct Labour
5,400
a
Overhead Applied
41,082
b
Total Cost $1,090,082

Predetermine overhead rate = $136.94
Direct labour hours worked in year 3 = 300
Overhead Applied Cost = $136.94 x 300 = $41,082
1c. Predetermine overhead rate = $136.94
Actual Labour hours = 74,000
Applied Overhead = Actual labour hours x predetermine overhead rate
= $136.94 x 74,000 = $10,133,360
Applied Overhead = $10,133,360
Actual Overhead = $9,200,000 -
Over applied = $933,650
Since the Applied Overhead is $10,133,360 which is $933,650 greater than the Actual
Overhead ($9,200,000), therefore the manufacturing overhead for year 3 is over applied.
1d.
Working:
a. 74,000 – 1,745 – 2,700 – 6,110 – 1,300 = 62,145
b. 1,745 + 2,700 = 4,445
c. 6,110 + 1,300 = 7,410
Direct
labour hours
Percentage of
total cost Charge
Cost of Goods Sold
62,145
a
83.98
d
$ 784,003.69
g
Job AB30 & AB31 (Finished
goods)
4,445
b
6.01
e
56,106.95
h
Job AB35 & AB41 (Work-in-
process)
7,410
c
10.01
f
93,499.36
i
Total 74,000 100.00% $933,560

d.
62,145
74,000
x 100% = 83.98%
e.
4,445
74,000
x 100% = 6.01%
f.
7,410
74,000
x 100% = 10.01%
g. 83.98% x 933,560 = 784,003.69
h. 6.01% x 933,560 = 56,106.96
i. 10.01% x 933,560 = 93,449.36
Journal Entry
Applied Manufacturing Overhead $10,133,560
Work in Process Inventory $93,449.36
Cost of Goods Sold $784,003.69
Finished Goods Inventory $56,106.96
Manufacturing Overhead Control $9,200,000
1e. Devlin Manufacturing Co. is a manufacturing company that produce special purpose
equipment for construction industry based on customer details, therefore Devlin used job
costing system for his company. Job costing includes the accumulation of the costs of
materials, work, and overhead for a particular job. This approach suit Devlin since the job
order that Devlin have is unique and incurred different processes in producing the product.