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QUESTION 5 (20 MARKS 36 MINUTES) Company A uses a job costing system. It manufactures customized winter outfits made out of karakul wool. It is
QUESTION 5 (20 MARKS 36 MINUTES) Company A uses a job costing system. It manufactures customized winter outfits made out of karakul wool. It is the company's policy to absorb overhead costs on the basis of direct labour cost. Should any overlunder appied overhead arise, is adjusted against the cost of goods sold. During the month of April 2019, Company A reoeived an order from Delta Secondary School to provide them with 160 winter outfits for their leamers of which the information is provided below Budgeted information: Direct labour cost N$15/hour N$ 7,200 160 units 2 hours 1.5 kilograms Total overhead costs Total production Direct labour hours per finished winter outfit Direct material per finished winter outfit Additional information: During the month of April 2019, a total of 160 winter outfits were manufactured and delivered at a profit margin af 25 % The production department was so efficient such that they could only spent 75 % of the budgeted time per finished winter outfit. Accordingly, a 5 % reduction in direct labour cost per hour has been recorded. As for material utilization, the production department has operated exactly as per the budgeted production requirement. Materials are sourced from a local supplier at N$9.50kilogram. No further information is required other than what has been provided so far. REQUIRED MARKS Determine the overhead cost charged to Order No. 005. Compute the production cost per unit in lieu of the 160 winter outfits Determine the gross profi (loss) derived from the delivery of 160 winter 5.1 5.2 5.3 outfits 5.4 Suppose the actual overhead cost incurred is NS 5,000. Determine the over (under) applied overhead and explain how it would have affected the cost of goods sold. Why do companies estimate overhead costs? What is the difference between job costing and process costing? Give one example for each as a way of substantiating your answer. TOTAL MARKS FOR QUESTION 5 3 5.5 5.6 3 20 6
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