{ll3:03 5.5316 El .iF_.'-_\\ Question 1 (20 marks) Sam Company uses job-order coating system to record and track the costs of its projects. The following infomation is provided for the decorating projects in January 2020: W Barium} Direct labour hours 300 450 Machine hours [00 120 Direct materials $108,000 $i50,000 Direct labour cost $520,000 $480,000 There was no work in process at the beginning of January 2020. Actual manufacturing overhead costs were $30,000 for January 2020. Sam cemputee its predetermined overhead rate armualiy en the basis of machine hours. At the beginning of 2020, Sam estimated that its total manufacturing overhead would be $900,000, the totai direct labour cost would be $6,000,000, and the company would work a total of 40,000 direct labour hours and 5,000 machine- hours on all projects. Required: {at} Project AQDI was successllly completed and sold on 3] January 2020. Determine the job cost of Project A00] and its contract price if the markup percentage of this job is 50%. (5 marks) {bl Assume that the Company allocates any underapplied or overapplied manufacturing overhead to work in process, nished goods and cost of goods said on the basis of 2:2:6, prepare the adjusting entry to show the allocation for January 2020. (3 marks) Sam Company has just completed a major change in its quality control (QC) process. Previously, products had been reviewed by QC inspectors at the end of each major process, and the compensation of company's eight QC inspectors were charged as direct labour to the operation or job. In an effort to improve efciency and quatity, a computerized video QC system will be purchased in 2021 for $500,000. The machining staff will be offered voluntary redundancy. The company's President is confused. His Director of Operation has told hire how efcient the new system is, yet these is a large increase in the manufacturing overhead rate. The information for automation in 202! is shown below: M Budgeted manufacturing overhead 5 l .5 00.000 Budgeted direct labour cost $5,000.00) Budgeted machine hours 0,000 hours "Budgeted manufacturing overhead cost for 2021 increased signicantly," lamented the President, "how can we compete with such a high. manufacturing overhead rate?\" {1'} Explain why companies develop manufacturing overhead rates. (2 marks] { ii) Explain why the increase in the manufacturing overhead cost should not have a negative financial impact on Sam Company. (2 marks) (iii) Explain what other factors Sam Company should take into account before deciding whether or not to purchase the computerized video QC system. (3 1030(5) [Total for Question 1: 20 marks]