P4.33 LO 4.6 Job costing; journal entries Foundation Ltd, which uses a job costing system, had two jobs in process at the start of the year: job number 137 ($84000) and job number 138 ($53500). The following information is available:

(a) The company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $840000 and 16000 hours, respectively.

(b) The company worked on four jobs during the first quarter (i.e. from 1 January to 31 March). Direct materials used, direct labour incurred and machine hours consumed were as shown in the following table. Job numbers Direct material $21.000 Direct labour 137 $35000 138 - 22000 139 44 000 65.000 140 15000 8800 Machine hours 1200 700 2000 500

(c) Manufacturing overhead during the first quarter included depreciation ($34000), indirect labour ($60000), indirect materials used ($50000) and other factory costs ($139 500).

(d) Foundation Ltd completed job number 137 and job number 138 during the first quarter. Job number 138 was sold on credit, producing a profit of $34 700 for the firm. Required 1. Determine the company's predetermined overhead rate. 2. Prepare journal entries for the first quarter to record the following (Note: Use summary entries where appropriate by combining individual job data):

(a) issue of direct material to production and the direct labour incurred

(b) manufacturing overhead incurred during the quarter

(c) application of manufacturing overhead to production

(d) completion of jobs number 137 and 138

(e) sale of job number 138. 3. Determine the cost of the jobs still in production as of 31 March. 4. Did the cost of the finished goods inventory increase or decrease during the first quarter? By how much?