Question

XYZ uses normal and job order costing. XYZ had two jobs in process at the start of March: job number 24 ($34,000) and job number 25($54,000). XYZ applies manufacturing overhead on the basis of machine hours ("MH"). The budgeted overhead and machine activity level for the year were anticipated to be $720,000 and 24,000 MH respectively. XYZ worked on four jobs during March. The direct materials used, direct labour incurred and machine hours consumed during March were as shown in the table below:

Job number Direct materials Direct labour Machine hours (MH)

24 $23,000 $30,000 1200

25 $0 $45,000 700

26 $36,000 $15,000 2000

27 $16,000 $15,000 500

Budgeted and actual direct labour rate is $12 and $15 per hour respectively. Manufacturing overhead incurred for March are as follows: depreciation ($30,000), indirect labour ($40,000), indirect materials used ($45,000) and other factory expenses ($23,000). XYZ paid cash for all overhead expenses. Manufacturing overhead variance is closed on a monthly basis by proration to work in process, finished goods and cost of goods sold. During March, XYZ completed job numbers, 24,25 and 26. Job number 25 was sold on credit for a gross profit of $34,500.

Required:

Refer to Question

Question 8 (Adapted from 20:19 July Q1} XYZ uses normal and job order costing. XYZ had two jobs in process at the start of March: job ntunber 24 [$34.) and job number 25($54,{}}. XYZ applies manufacturing overhead on the basis of machine hours (\"Lil-I\"). The budgeted overhead and machine activity level for the year were anticipated to be $T2.{} and 24.13012} MH respectively. XYZ worked on four jobs (1111'ng March. The direct materials used, direct labour incurred and machine hours consumed during March were as shown in the table below: Job Direct Direct Machine number materials labour hours (MH) 24 $23 .6131} $3,{] 121312} 25 $13 $45,{} THE) 26 $363131? $15,13 E 27 3516.912111] $153135 S Budgeted and actual direct labour rate is $12 and $15 per hour respectively. Manufacturing overhead incurred for March are as follows: depreciation {$3.{}). indirect labour ($4G.G). indirect materials used ($45.13) and other factory expenses ($23.13). XYZ paid cash for all overhead expenses. Manufacturing overhead variance is closed on a monthly basis by proration to work in process. nished goods and cost of goods sold. During March. XYZ completed job numbers. 24.25 and 25. 1 ob number 25 was sold on credit for a gross prot of $34.5. Required: (a) Compute XYZ's predetermined overhead rate (b) Prepare jomnal entries (to described the ow of production-related costs} for March to record the following: (i) Manufacturing overhead incurred. (ii) Application of manufacturing overhead to production. (iii) Completion of Job number 24. 25 and 26. (c) Compute the costs of jobs still in production and costs in nished goods inventory at the end of March. (d) Determine the underfover-applied manufacturing overhead for March. (e) Calculate the amounts to be charged to work in process. nished goods inventory and cost of goods sold at the end of March in order to close off the manufacturing overhead variance. (f) The CECII believes that closing the overhead variance only to cost of goods sold will minimise the impact on net prot for March. Is he correct? Explam