Question: Refer to image

...The balance, as at 30 November 20X8, in the MOH account was $9,250 Dr. In December 20X8, actual MOH incurred was $109,350 and applied MOH for the 3 jobs were yet to be recorded.

In January 20x9, there was a phone call from the customer of Job #124 informing RIS that 50 units of watches were found to have broken glass faces. RIS has accepted responsibility for the return of the watches and the customer does not want replacements.

Required:

(a) Compute and record the necessary journal entries to account for the production costs and sales of Job #124 completed in the last week of December 20X8.

(b) Based on information obtained in January 20X9 from the customer of Job #124, prepare necessary journal entries to record the costs related to the return of the 50 damaged units which were to be treated as abnormal spoilage. Explain the impact on profits of Job #124 if the damaged units were treated as normal spoilage instead (show workings where relevant).

(c) Calculate the over/under applied MOH for the year ended 31 December and create journal entry to close this MOH variance.

RIS Watch Limited manufactures wrist watches for various brands. The company designs and assembles products according to customers' specifications. RIS uses normal costing to cost its job orders and applies plant-wide manufacturing overhead (MOH) based on direct labour hours (DLH). Over or under-applied overhead is closed to Cost of Goods Sold (COGS) annually on 31st December. RIS sells its products on fixed price or on cost plus basis. The watches are designed in the Design Department. Once the design is approved, the material is sourced from contract manufacturers and the products are manually assembled in the Assembly Department. The assembly workers are paid an hourly rate of $8 per DLH and the designers are paid a lump sum fee based on the complexity of each job. RIS's budgeted MOH, DLH and Machine Hours (MH) for the year 20X8 are estimated as follows. MOH DLH MH Design Department Variable $2,400,000 10,000 12,000 Assembly Department Variable $1,200,000 240,000 2,000 Assembly Department Fixed $2,400,000 Appended below are relevant data for three job orders processed by RIS during December 20X8. Job Order #124 #125 #126 Quantity in units 4,000 4,000 2,000 Contract Price $360,000 $300,000 Cost plus* Direct Materials $225,000 $232,000 $126,000 Designer fee $5,000 $8,000 $12,000 Assembly labor $18,000 $9,000* $7,200 * 40% assembled ** Normal Product Costs plus 30% Jobs #124 and #126 were completed within their respective specified deadlines and Job #125 is still in progress. Job #124 was delivered and billed in the last week of December 20X8. Accounting entries in the ledger account for Job #124 are as follows before MOH was posted in December 20X8: Work in Process #124 Direct Materials $225,000 Designer Fee $5,000 Assembly Labour $18,000 The balance, as at 30 November 20X8, in the MOH account was $9,250 Dr. In December 20X8, actual MOH incurred was $109,350 and applied MOH for the 3 jobs were yet to be recorded