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Enneagon Pty Ltd is a manufacturing firm that produces customised office gifts according to customers orders. The company adopts the job order costing system. and
Enneagon Pty Ltd is a manufacturing firm that produces customised office gifts according to customers" orders. The company adopts the job order costing system. and manufacturing overhead is allocated to production at a predetermined overhead rate of 200 percent of direct material cost, According to the company's policy, any over-or under-allocated manufacturing overhead is written off to the cost of goods sold. The firm does not have any work in-process at the beginning or end of the quarter. Below is the financial information for the ath quarter of 2021: Direct material used $220,000 2 Direct labour cost incurred $700,000 Indirect labour cost incurred $130,000 Indirect material used 580,DDO Selling and administrative expenses 5600,000 Depreciation of factory building $100,000 Depreciation of factory equipment $70,000 Insurance on factory and equipment $50,000 Electricity for factory $30,000 Finished goods inventory, October 1* SO Finished goods inventory, December 31 $500,000 Required [al Calculate the cost of goods manufactured for the company for the 4" quarter of 2021. Clearly show the workings of the calculation. [4 marks] Iby Calculate the difference between the actual manufacturing overhead cost incurred and the manufacturing overhead cost allocated, Identify whether it is under- allocated or over allocated. Clearly show the workings of the calculation. (6 marks] (c) Calculate the adjusted cost of goods sold for the 4" quarter of 2021. Clearly show the workings of the calculation. (6 marks) (d] Provide one reason why firms use budgeted overhead allocation rate to allocate manufacturing overhead rather than use the actual manufacturing overhead cost and justify your answer. (4 marks) led The company considers if there are alternative adjustment methods for the over- or under-allocated manufacturing overhead. Suggest one alternative adjustment for the company to consider, In the context of Enneagon Pty Lid, would it be better for the manager to follow the existing policy or to switch to the alternative adjustment mathed all cupmass? Fundsin famKings of the calculation. (6 marks) (d) Provide one reason why firms use budgeted overhead allocation rate to allocate manufacturing overhead rather than use the actual manufacturing overhead cost and justify your answer. (4 marks) (e) The company considers if there are alternative adjustment methods for the over- or under-allocated manufacturing overhead. Suggest one alternative adjustment for the company to consider. In the context of Enneagon Pty Ltd, would it be better for the manager to follow the existing policy or to switch to the alternative adjustment method you suggest? Explain. (6 marks) (4 +6+6+4+6 = 26 marks
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