HIGHER EDUCATION QUESTION 1 Job Costing Applying Overheads (10 Marks) Service Industry, time period used to compute Indirect-cost rates Visuals Pty Ltd produces annual reports and marketing materials for large companies. There are three categories of cost in its normal Job-costing system: direct materials, direct labour and overhead (both variable and fixed), allocated on the basis of direct labour costs. B D A 1 Visuals has the following budgeted data for 2020: 2 3 Jan-Mar 4 Direct materials $ 450,000 5 Direct labour costs $ 300,000 Variable overhead costs as a 60% percentage of direct labour cost 7 Fixed overhead costs 300,000 $ $ Total 1,360,000 600,000 60% 6 $ 1,200,000 Visuals Pty Ltd prices each job at 120% of costs. The company has received an order labelled job 335, for 160,000 sales catalogues for the local shopping centre. Actual direct materials costs for this job are $16,000 and actual labour costs are $12,000. Required 1. Calculate the Fixed Overhead rate and Variable Overhead Rate when the Jan-Mar Quarter Budgets are used to allocate overhead costs. (2marks) 58 Variable overhead costs as a percentage of direct labour cost 60% 60% 6 7 Fixed overhead costs 300,000 $ 1,200,000 Visuals Pty Ltd prices each job at 120% of costs. The company has received an order labelled job 335, for 160,000 sales catalogues for the local shopping centre. Actual direct materials costs for this job are $16,000 and actual labour costs are $12,000. Required 1. Calculate the Fixed Overhead rate and Variable Overhead Rate when the Jan-Mar Quarter Budgets are used to allocate overhead costs. (2marks) 2. Calculate the Fixed Overhead rate and Variable Overhead Rate when the Total Budgets are used to allocate overhead costs (2 marks) 3. Calculate the total cost of the invoice for job 335: (1). if it is completed in January-March 2020 and the budgeted overhead rate for that quarter is used to allocate overhead costs (2 Marks) (ii). if it is completed in January-March 2020 and the budgeted overhead rate for the year is used to allocate overhead costs (2 Marks) 4. Recommend, with reasons, the method of costing jobs that is most suitable for pricing purposes at Visuals Pty Ltd. (2 Marks)