Question 1: Short answer questions

1. King Ltd uses a job costing system. The companys budget for the year included a budgeted total manufacturing overhead cost of $1,800,000 and budgeted total direct labour hours of 60,000 hours. Manufacturing overhead cost is applied to jobs based on direct labour-hours worked. During December, King Ltd started and completed one manufacturing job (Job 571). The events of December are:

Direct material cost: Job 571	$215,000
Indirect material cost for December	$55,000
Other manufacturing overhead cost incurred in December	$45,000
Direct labour cost (4,800 hours, including 100 hours idle time)	$120,000
Indirect labour cost for December (excluding idle time)	$40,000

Tasks

1. Calculate the total cost of Job 571.

2. Determine the amount by which the manufacturing overhead cost is overapplied or underapplied for December.

2. You are provided with the following information about the process costs for Paulas Machines Ltd for December. Material is added at the start of the process and conversion costs are incurred evenly throughout the process.

Work in process (units) - 1 December	250,000
Units started in December	1,250,000
Units completed and transferred out	1,200,000
Normal spoilage units during manufacturing	29,520
Work in process (units) - 31 December	60% complete with respect to conversion.

Spoilage is normally detected 25% of the way through the manufacturing process.

Tasks

1. Prepare a schedule of equivalent units.

2. Assume that the direct material cost per equivalent unit is $1.50 and the conversion cost per equivalent unit is $3.00. Calculate the total cost of finished goods for the month of November.

3. You are presented with the following support department information:

Service provider and allocation base

Support departments

Manufacturing lines

	Department A	Department B	Department C	Line 1	Line 2
Department A (number of jobs)	100	300	200	250	350
Department B (number of employees)	None	None	20	500	500
Department C (number of jobs)	25	80	None	300	420

Support department costs are as follows:

Department A:	$1,100,000
Department B:	$504,000
Department C:	$760,000

Task

Allocate support department costs to Manufacturing line 1 and Manufacturing line 2 using the step-down method.