Question 2: Job costing (50 marks)

Pacifika Art Musical Instrument Ltd manufactures brass musical instruments for use by police bands around the Pacific Region. The company uses a job costing system, in which manufacturing overhead is applied on the basis of direct labour hours. The company's budget for the current year included the following predictions:

Budgeted total manufacturing overhead $462,000

Budgeted Total direct labour hours 21, 000

During March, the firm began two production jobs:

Job number T81, consisting of 76 trombones.

Job number C40, consisting of 110 cornets.

The events of March are described below:

a) 1,000 square meters of rolled brass sheet metal were purchased for $6,000 on account.

b) 400 kilograms of brass tubing were purchased on account for $5,200.

c) The following requisitions were filed on 5 March:

Requisition number 112: 260 square meters of brass sheet metal (for job number t81) @ $5.50 per square meter.

Requisition number 113: 1,100 kilograms of brass sheet metal (for job C40) @ $9 per kilogram.

Requisition number 114: 10 liters of valve lubricant @ $12 per liter.

All brass used in production is treated as direct material. Valve lubricant is an indirect material.

d) An analysis of labour time sheets revealed the following labour usage for March:

Direct labour: job number T81, 850 hours @ $20 per hour

Direct labour: job number C40, 950 hours @$20 per hour

Indirect labour: general factory clean up, $4,500

Indirect labour: factory supervision salaries $9,600

e) Depreciation of the factory building and equipment during March amounted to $13,000.

f) Rent paid in cash for warehouse space used during March was $1,340.

g) Electricity costs incurred during March amounted to $2,400. The invoices for these costs were received, but the bills were not paid in March.

h) March council rates and property taxes on the factory were paid in cash $2,370.

i) The insurance cost covering factory operations for the Month of March was $2,900. The insurance policy has been prepaid.

j) The costs of salaries and on-costs for sales and administrative personnel paid in cash during March amounted to $7,500.

k) Depreciation on administrative office equipment and space amounted to $4,500.

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l) Other selling and administrative expenses paid in cash during March amounted to $1,150.

m) Job number T81 was completed during March.

n) Half the trombones in job number T81 were sold on account during March for $720 each.

The 1 March balances in selected accounts are as follows:

Cash $11,000

Accounts receivable 20,000

Prepaid insurance 6,000

Raw material inventory 150,000

Manufacturing supplies inventory 600

Work in process inventory 89,000

Finished goods inventory 223,000

Accumulated depreciation: buildings and equipment 99,000

Accounts payable 14,500

Wages payable 8,500

Requirements:

1. Calculate the company's predetermined overhead rate for the current year. (3 marks)

2. Complete the job cost sheets for job number T81 (Round-off unit cost to the nearest cent and where necessary, show ALL relevant workings. The job cost sheet can be downloaded from the AF102 moodle page.) (12 marks)

3. Prepare journal entries to record the events of March. (Where appropriate, show ALL relevant workings. Ignore narrations.) (9 marks)

4. Calculate the overapplied or underapplied for March. required journal entry to close this balance in the cost of goods sold. (Show calculation for actual and applied overhead.) (8 marks)

5. schedule of cost of goods manufactured for March. (10.5 marks)

6. schedule of cost of goods sold for March (4.5 marks)

7n income statement for March. (3