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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:

  1. Calculate the companys predetermined overhead rate. (1.5 marks)
  2. Calculate manufacturing overhead applied to production for the first quarter. (1.5 marks)
  3. Determine the cost of jobs completed in the first quarter. (4 marks)
  4. Determine the cost of goods sold at the end of the first quarter. (1 mark)
  5. Can a company use both job order costing and process costing? Why or why not? (3 marks)

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