PART $1$

$(25$ marks$)$

Kirpalani Stores manufactures customized household furnishings. The company uses a perpetual inventory

system and has a highly labour$-$intensive production process, so it assigns manufacturing overhead based

on direct labour cost. Kirpalani expects to incur $$2,205,000$ of manufacturing overhead costs and estimated

direct labour costs of $$3,150,000$ during $2019.$

At the end of December $2018,$ Kirpalani reported work in process inventory $($Job $551)$ of $$93,000$

The following events occurred during January $2019.$

i$)$ Purchased materials on account, $$392,000.$

ii$)$ Incurred manufacturing wages of $$400,000$

iii$)$ Requisitioned direct materials and used direct labour in manufacturing.

iv$)$ Issued indirect materials to production, $$30,000.$

v$)$ Charged indirect manufacturing wages to production, $$60,000.$

vi$)$ Depreciation of production machinery, $$85,000$

vii$)$ Other manufacturing overhead costs incurred on units $551$ to $554$ amounted to $$49,000.$

viii$)$Allocated overheads to jobs at the predetermined rate

ix$)$ Units completed: $551,552$&$554.$

x$)$ Sold units $551$&$554($billed customers at a margin of $33\frac{1}{3}\%$ on sales$)$

Required:

$($a$)$ Compute Kirpalani's predetermined manufacturing overhead rate for $2019.$

$($b$)$ Calculate the total manufacturing costs for each job.

$($c$)$ Using the total figures, record the above transactions in the general journal.

$($d$)$ Post the manufacturing overhead transactions to the Manufacturing Overhead T$-$account, clearly

showing the balance before closing the account. State the journal entries necessary to dispose of

the variance. Assume that the manufacturing overhead variance is immaterial. $(3$ marks$)$

$($e$)$ What is the balance in the Cost of Goods Sold account after the adjustment? $(2$ marks$)$

$($f$)$ Compute Kirpalani's gross profit earned on the jobs, after adjusting for the manufacturing overhead

variance

$($g$)$ Post the appropriate entries to Work in Process Inventory Control account & determine the account

balance on January $31.$

$(21$ marks$)$