QUESTION 6: Job + ABC costing [30 marks]

Tying the Knot, are a small wedding planning business located on the Sunshine Coast, Queensland, Australia. They currently use a job costing system to manage and track the cost of the weddings they manage.

This month they are planning three weddings. Each Wedding is tracked using a unique customer ID number. The materials and labour that have been used for each wedding is outlined below.

Cost Summary per Wedding	4000	4001	4002	Total
Direct Materials	$10 000	$20 00	$5 000	$35 000
Direct Labour	$1 200	$25 000	$ 800	$27 000

The budgeted overhead cost for the year is $350 000 and it is to be allocated based on total labour dollars. The budgeted total labour for the year is $100 000.

Required:

1. Based on the information provided, calculate the total cost of each wedding using the estimated overhead allocation rate. [5 marks].

2. Actual overhead for the month amounted to $100 000. Close the over applied or under applied overhead to cost of sales. [2.5 marks].

3. Wedding 4000 and 4001 were held in the month and paid for by the customer. Job 4002 is still being planning and due to be delivered next month. Review the journal entries prepared and identify four (4) errors and provide the correction. [ 10 marks]

Work-in-Process $ 35 000

Materials Inventory $ 35 000

Work-in-Process $ 20 000

Overhead Cost Control $7 000

Wages Payable $ 27 000

Work-in-Process $ 87 500

Overhead Cost Control $ 87 500

Overhead Cost Control $ 100 000

Various Accounts $ 100 000

Finished Goods $24 000

Work-in-Process $24 000

Jobs 4000 and 4002

Cost of sales $132 000

Finished Goods $132 000