Question
Amber Group uses job order costing. At the beginning of the year, the manager of the company estimates a fixed manufacturing overhead cost of $285,000
Amber Group uses job order costing. At the beginning of the year, the manager of the company estimates a fixed manufacturing overhead cost of $285,000 and a variable manufacturing overhead cost of $10.75 per direct labour hour. The manager also estimates that a total of 26,500 direct labour hours will be required for the coming year.
The following transactions took place during the year (all sales and purchases were on account).
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Raw materials worth $530,000 were purchased for production purposes.
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Raw materials worth $300,000 were requisitioned for the use in production (two-third of the amount was direct material and the remaining indirect material).
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Due to higher level of production, the total direct labours worked for 27,300 hours, for the whole year. The labour were paid at a rate of $14.50 per hour.
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The indirect labour cost amounted to $326,000.
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Additional salaries of $267,000 were given to selling & admin staffs.
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Utility bill for the factory totalled $8,000. Utility bill for the corporate office of Amber Grouptotalled another $8,000.
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Depreciation cost incurred $325,000 (65% was factory machinery related and the remainder was office equipment related).
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Advertising expenses of $42,600 were accrued and unpaid.
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Maintenance cost for factory machinery incurred $20,000.
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Rent expenses for Amber Group was $180,000, for the whole year. (80% of the building is factory and the rest in corporate office).
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Manufacturing overhead was applied to all jobs.
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1500 units were completed and transferred as finished goods, out of which 1000 units were sold to customers at a selling price of $1100 per unit.
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What should be the value of Total Manufacturing Cost of Amber Group for all the jobs that were completed by the end of the year? (5 marks)
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Calculate whether Manufacturing Overhead is Over Applied or Under Applied, explain your answer. Journalise the entry for MOH over/under applied. (4 marks)
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