Question
Question 2 (11 marks) Shoostar Ltd is a video tech company that produces videos for companies marketing campaigns and video training content. All jobs are
Question 2 (11 marks)
Shoostar Ltd is a video tech company that produces videos for companies marketing campaigns and video training content. All jobs are tailor-made to the clients requirements. The company uses a job costing system, and had 2 jobs in process at the start of the year: Job S1 ($66 000) and Job S3 ($55 000). The following information is available:
(i) The company applies manufacturing overhead on the basis of video production hours. Budgeted overhead and video production activity for the year were anticipated to be $800 000 and 40 000 hours, respectively.
(ii) The company worked on four jobs during the first quarter (i.e. from 1 July to 30 September). Direct materials used, direct labour incurred and video production hours were as shown in the following table:
Job numbers | Direct material | Direct labour | Video production hours |
S1 | $ - | $40 000 | 500 |
S2 | 50 500 | 23 000 | 1000 |
S3 | - | 65 000 | 1 500 |
S4 | 30 000 | $40 000 | 2 000 |
(iii) Manufacturing overhead incurred during the first quarter was $385 000.
(iv) Shoostar Ltd completed Job S1, and Job S3 during the first quarter. Job S1 was sold on credit, producing a profit of $60 000 for the company.
Required:
- Calculate the companys predetermined overhead rate. (1.5 marks)
- Calculate manufacturing overhead applied to production for the first quarter. (1.5 marks)
- Determine the cost of jobs completed in the first quarter. (4 marks)
- Determine the cost of goods sold at the end of the first quarter. (1 mark)
- Can a company use both job order costing and process costing? Why or why not? (3 marks)
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