Nini Kids Fashion, which uses a job costing system, had two jobs in process at the start of January 2019:

Job Number 504 ($160,000)

Job Number 505 ($110,000)

The management of the company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year 2019 were anticipated to be $1,560,000 and 30,000 hours, respectively.

The following information is available:

a)The company worked on four jobs during January 2019. Direct materials used, direct labour incurred, and machine hours consumed were as follows:

Job Number

Direct material

Direct labour

Machine hours

504

$40,000

$80,000

2,500

505

-

$46,000

1,600

506

$90,000

$150,000

4,000

507

$20,000

$21,000

2,000

b)During January 2019, manufacturing overhead included charges for:

Indirect labour ($110,000)

Depreciation ($80,000)

Indirect materials used ($20,000)

Other factory costs ($290,000)

c)Nini Kids Fashion completed job number 504 and job number 505. Job number 505 wassold on credit,producing a profit of $72,000 for the company.

(a)Determine the company's predetermined overhead application rate for the year 2019.

(2.5 marks)

(b)Prepare journal entries for January 2019 to record the following

(Note: Use summary entries where appropriate by combining individual jobs)

(i)The issue of direct material to production and the direct labour incurred.

(4 marks)

(ii)The manufacturing overhead incurred during January 2019.

(2.5 marks)

(iii)The application of manufacturing overhead to production.

(2 marks)

(iv)The completion of job numbers 504 and 505.

(3 marks)

(v)The sale of job number 505.

(2 marks)

(c)Determine the cost of the jobs still in production as of January 31.

(3 marks)

(d)Did the finished goods inventory increase or decrease during the January 2019, and by how much?

(2 marks)

(e)Compute the overapplied and underapplied overhead. What are the possibilities of overapplied and underapplied overheads?