Question:

QClub Limited manufactures tags for luggage with GPS tracking. During the month of May, the following occurred: (a) Raw materials were purchased on account for $23,175 (b) Raw materials totalling $19,000 were requisitioned for use in production (c) Direct labour payroll for the month was $17,850 with an average wage of $8.50 per hour (d) Factory overhead is charged to production at the rate of $7 per direct labour hour (e) Actual overhead of $15,500 was incurred and paid, where this included factory rent of $9,500, factory electricity costs of $2,000 and depreciation on factory equipment $4,000. (f) Completed units costing $36,085 were transferred to finished goods (g) Tags costing $30,000 were sold on account for $36,000

(1)Calculate the ending balances of the following accounts: Raw Materials, Work in progress and Finished goods (1 mark each). The following beginning balances are provided: Raw materials $5,170, Work in progress $11,200, and Finished goods $2,630.

(2)Assume that the overhead variance was materials and write the journal entry for the reconciliation of overhead costs from part (2) and COGS balance is $30,000

(3)Given we know the actual overhead costs at the end of May, why did we have to reconcile the actual with the expected overhead costs at the end of June?