Question
Custom Worx (Pty) Ltd is a manufacturing company that uses job-order costing. The company's inventory balances were as follows at the beginning and end of
Custom Worx (Pty) Ltd is a manufacturing company that uses job-order costing.
The company's inventory balances were as follows at the beginning and end of the year:
Opening balance Closing balance
Raw material 28 000 44 000
Work in progress 54 000 18 000
Finished goods 124 000 54 000
The following transactions were recorded for the year:
1.Raw materials were purchased, R630 000.
2.Raw materials were requisitioned for use in production, R614 000 (R562 000 direct and R52 000 indirect).
3.The following employee costs were incurred: direct labour, R754 000; indirect labour, R192 000; and administrative salaries, R344 000.
4.Selling costs, R294 000.
5.Factory utility costs, R20 000.
6.Depreciation for the year was R254 000 of which R240 000 is related to factory operations and R14 000 is related to selling and administrative activities.
7.The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work
33 000 machine-hours and incur R462 000 in manufacturing overhead cost. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34 000 machine-hours.
8.Sales for the year totalled R2 506 000.
REQUIRED
1. Calculate the cost of goods manufactured, showing all workings clearly. 10
2. Calculate the over- or under application of overheads. 4
Neatness and layout of workings 1
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