RISW Limited manufactures wrist watches for various brands. The company designs and assembles products according to customers' specifications. RISW 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 31 December. RISW 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 $10 per DLH and the designers are paid a lump sum fee based on the complexity of each job. RISW's budgeted MOH, DLH and Machine Hours (MH) for the year 2020 are estimated as follows. Design Department Variable Assembly Department Variable Assembly Department Fixed MOH $1,440,000 $720,000 $1,440,000 DLH 4,000 96,000 MH 4,800 800 Appended below are relevant data for three job orders processed by RISW during December 2020. Job Order #261 #262 #263 Quantity in units 4,000 4,000 2,000 Contract Price $230,000 $140,000 Cost plus** Direct Materials $90,000 $92,800 $50,400 Designer fee $2,000 $3,200 $4,800 Assembly labour $22,500 $11,250* $9,000 * 40% assembled ** Normal Product Cost plus 30% Jobs #261 and #263 were completed within their respective specified deadlines and Job #262 is still in progress. Job #261 was delivered and billed in the last week of December 2020. Accounting entries in the ledger account for Job #261 are as follows before MOH was posted in December 2020: Work in Process #261 Direct Materials $90,000 Designer Fee $2,000 Assembly Labour $22,500 The balance, as at 30 November 2020, in the MOH account was $1,280 Dr. In December 2020, actual MOH incurred was $149,360 and applied MOH for the 3 jobs were yet to be recorded. In January 2021, there was a phone call from the customer of Job #261 informing RISW that 100 units of watches were found to have broken glass faces. RISW 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 #261 completed in the last week of December 2020. (b) Based on information obtained in January 2021 from the customer of Job #261, prepare necessary journal entries to record the costs related to the return of the 100 damaged units which were to be treated as abnormal spoilage. Explain the impact on profits of Job #261 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 write a journal entry to close this MOH variance. RISW Limited manufactures wrist watches for various brands. The company designs and assembles products according to customers' specifications. RISW 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 31 December. RISW 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 $10 per DLH and the designers are paid a lump sum fee based on the complexity of each job. RISW's budgeted MOH, DLH and Machine Hours (MH) for the year 2020 are estimated as follows. Design Department Variable Assembly Department Variable Assembly Department Fixed MOH $1,440,000 $720,000 $1,440,000 DLH 4,000 96,000 MH 4,800 800 Appended below are relevant data for three job orders processed by RISW during December 2020. Job Order #261 #262 #263 Quantity in units 4,000 4,000 2,000 Contract Price $230,000 $140,000 Cost plus** Direct Materials $90,000 $92,800 $50,400 Designer fee $2,000 $3,200 $4,800 Assembly labour $22,500 $11,250* $9,000 * 40% assembled ** Normal Product Cost plus 30% Jobs #261 and #263 were completed within their respective specified deadlines and Job #262 is still in progress. Job #261 was delivered and billed in the last week of December 2020. Accounting entries in the ledger account for Job #261 are as follows before MOH was posted in December 2020: Work in Process #261 Direct Materials $90,000 Designer Fee $2,000 Assembly Labour $22,500 The balance, as at 30 November 2020, in the MOH account was $1,280 Dr. In December 2020, actual MOH incurred was $149,360 and applied MOH for the 3 jobs were yet to be recorded. In January 2021, there was a phone call from the customer of Job #261 informing RISW that 100 units of watches were found to have broken glass faces. RISW 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 #261 completed in the last week of December 2020. (b) Based on information obtained in January 2021 from the customer of Job #261, prepare necessary journal entries to record the costs related to the return of the 100 damaged units which were to be treated as abnormal spoilage. Explain the impact on profits of Job #261 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 write a journal entry to close this MOH variance