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Question 2: Shoostar Ltd is a video tech company that produces videos for companies' marketing campaigns and video training content. All jobs are tailor-made to

Question 2:

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 company's predetermined overhead rate.
  2. Calculate manufacturing overhead applied to production for the first quarter.
  3. Determine the cost of jobs completed in the first quarter.
  4. Determine the cost of goods sold at the end of the first quarter.

5. Can a company use both job order costing and process costing? Why or why not?

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