Managerial Accounting

Q2 - Chapter 3 (15 marks) Intercity Roofing manufactures and installs custom shingles for use on damaged roofs of residential houses and apartments. The company uses a specialized manufacturing process to so sure the realacement shingles are an exact match with the existing roof. The company uses a job order costing system to apply manufacturing overhead on the basis of direct labour cost. The company estimates that during the next year, it will incur $70,000 in overhead costs and 14.000 direct labour hours during the period totaling $140,000. During the month of August, the following transactions occurred: a.) Purchased $180,000 of direct materials on account. b.) Purchased $5,000 of supplies on account. (The supplies consisted of glue and cleaning supplies.) c.) Requisitioned $170,000 of direct materials and $4,500 of supplies for use in production. d.) Incurred employee costs: i. Direct labour $150,000 ii. Indirect labour 40,000 iii. Administrative salaries 190.000 iv. Sales salaries 30,000 V. Sales commissions 90,000 e.) Advertised on local television: $5,000 f.) Rent: $12,000. 40% of the space related to sales offices, 60% was a shop used in production of roofing materials. g.) Depreciation: $25,000. 70% relates to roofing equipment, 30% relates to office equipment h.) Insurance expired: $15,000. 90% relates to the factory, the remainder relates to insurance on the office equipment. i.) Manufacturing overhead costs were applied to production j.) Goods costing $375,000 were completed. k.) The company had sales on account of $800,000. According to cost data, the jobs cost $350,000 Required: 1) What is the total actual operating (manufacturing) overhead for the period? 2) Was overhead overapplied or underapplied for the period? By how much