Question 3 During May, the following transactions were completed and reported by Jerico Company UOC Materials purchased on account, R60 100 Materials issued to production to fill job-order requisitions: direct materials R50 000, indirect materials R8 800. Payroll for the month direct labour R75 000, indirect labour R36 000; administrative R28 000, sales R19 000 Depreciation on factory plant and equipment R10 400. Property taxes on the factory accrued during the month R1 450 Insurance on the factory expired with a credit to the prepaid insurance account R6 200 Factory utilities R5 500 Advertising paid with cash R7 900 Depreciation on office equipment R800; on sales vehicles R1 650 Legal fees incurred but not yet paid for preparation of lease agreements R750 Overhead is charged to production at a rate or R18 per direct labour hour. Records show 4 000 direct labour hours were worked during the month. Cost of jobs completed during the month R160 000 The company also reported the following beginning balances in its inventory accounts: Materials inventory Work-in-process R37 000 Finished Goods inventory R50 000 Required: 3.1 Prepare journal entries to record the transactions occurring in May. 32 Prepare T-accounts for Materials Inventory. Overhead Control and Work-in-Process Inventory, and Finished Goods Inventory. Post all relevant entries to these accounts 3.3 Prepare a statement of goods manufactured. 3.4 If the overhead variance is allocated to cost of goods sold, by how much will cost of goods sold decrease or increase? Question 2 Elin Saunders, of Lawn Pro Company, designs and installs custom lawn and garden imigation systems for homes and businesses throughout the province. Each job is different, requiring different materials and labour for installing the systems. Lawn Pro estimated the following for the year. Number of installations Number of direct labour hours Direct materials cost Direct labour cost Overhead cost 340 5 440 R102 000 R54 400 R59 840 During the year, the following actual amounts were experienced: Number of installations Number of direct labour hours Direct materials cost Direct labour cost Overhead cost 290 4 350 R87 000 R43 500 R53 460 Required: 2.1 Should Lawn Pro use process costing or job costing? Explain. 22 If Lawn Pro uses a normal costing system and overhead is applied on the basis of direct labour hours, calculate the cost on an installation that takes R3 500 of direct materials and 30 direct labour hours 23 Explain why Lawn Pro would have difficulty using an actual costing system Question 4 Management at Thomason Media has decided to allocate the costs of the paper's two support departments (administration and human resources) to the two revenue-generating departments (advertising and circulation). Administration costs are to be allocated on the basis of Rands of assets employed, human resources costs are to be allocated on the basis of number of employees. The following costs and allocation bases are available: Department Direct Costs Number of Employees 10 Administration Human resources Advertising Circulation Totals R781 500 R492 700 AR957 800 R1 352 600 R3 584 600 Rands of Assets Employed R387 100 R291 700 R762 400 R1 870 300 R3 311 500 12| Required: 4.1 Using the direct method, allocate the support department costs to the revenue- generating departments Using the sequential method, allocate the support department costs to the revenue- generating departments Using the reciprocal method, allocate the support department costs to the revenue- generating departments Plaid-Clad manufactures golfbags in a two-department processi Assembly and Finishing. The Assembly Departinent uses weighted average costing the percentage completion of overhead in this department is unrelated to direct labour. The Finishing Department adds hardware to the assembled bags and uses FIFO costing: overhead is applied in this department on a direct labour basis. For June, the following production data and costs were gathered: 400 Assembly Department: Units Beginning WIP inventory (100% complete for DM; 40% complete for DL 250 and 30% complete for OH Units started 8 800 Ending WIP inventory (100% complete for DM; 70% complete for DL and 90% complete for OH) Assembly Department: Costs DMM DL O H Total Beginning WIP inventory 37551 6902504695 Current period 100 3206 3 606 27 681 191 607 Total costs 104 07564 29627 931 196 302 100 Finishing Department: Units Beginning WIP inventory (100% complete for transferred in; 15% complete for DM and 40% complete for Conversion) Units transferred in Ending WIP inventory (100% complete for transferred in; 30% complete for DM and 65% complete for Conversion Finishing Department: Costs Transferred DM Conversion 8 650 200 Total Beginning WIP inventory Current period il Total costs 12 176 188 570 190 746 30 15 471 15 501 952 301 21 600 225 641 2 1 695 227 942 Required: 5.1 Prepare a Production Report for the Assembly Department 52 Prepare a Production Report for the Finishing Department