1. Local Furniture Ltd (LFL)incurred the following production costs during the financial year

2019:

Direct material $348,000

Direct labour 648,000

Manufacturing overhead applied 360,000

Product costing $240,000 were finished, and product costing $264,000 were sold on credit for

$390,000. LFL purchased $50,000 worth of raw materials during the year. The inventory account balances at the beginning of the year were as

follows:

Raw materials $454,000

Work in process 36,000

Finished goods 60,000

Required:

a) Prepare the ledger accounts to show the flow of costs through LFL's manufacturing accounts

during the year.

b) Prepare a partial balance sheet and a partial statement to reflect the information given above.

2. Comfy Backpacks started and finished job number TK474, a batch of 300 backpacks, during July. The

job required $7 890 of direct material and 100 hours of labour at $30 per hour. The predetermined

overhead rate is $15.00 per direct labour hour.

a) Prepare the journal entries to record the incurrence of production costs and the completion

of job TK474.

b) Calculate the cost per backpack for job number TK474.

3. XYZ Ltd incurred $500 000 of manufacturing overhead costs during the financial year 2019.

However, only $400 000 of overhead was applied to production. At the end of the financial year, the

following amounts of the applied overhead remained in the various manufacturing accounts:

Work in process inventory $80,000

Finished goods inventory 100,000

Cost of goods sold 220,000

Required:

a) Explain whether the overhead cost was overapplied or underapplied to production. Determine

the amount.

b) Show your calculation to prorate the amount calculated in (a) above, to the three manufacturing

accounts.

c) Prepare a journal entry to close off the balance in the manufacturing overhead account.

d) What would be the effect on profit if the alternative method of closing off overhead were used?