Sami Design Ltd manufactures Sami musical instruments for use by high school students. The company uses a job costing system in which manufacturing overhead is applied on the basis of direct labour hours. The company's budget for the current year included the following predictions:

Budgeted total manufacturing overhead	$885,500
Budgeted total direct labour hours	44275

During March, the firm began two production jobs:

job number T81, consisting of 115 trombones

job number C40, consisting of 170 cornets.

The events of March are described as follows:

1000 square metres of rolled Sami sheet metal were purchased on credit for $2000. 400kilograms of Sami tubing were purchased on credit for $1300. The following requisitions were filed on 5 March:

requisition number 112: 250 square metres of Sami sheet metal @ $5 per square metre (for job number T81).

requisition number 113: 1000 kilograms of Sami tubing @ $10 per kilogram (for job number C40).

requisition number 114: 10 litres of valve lubricant @ $1 per litre.

All Sami used in production is treated as direct material. Valve lubricant is an indirect material. An analysis of labour time sheets revealed the following labour usage for March: direct labour: job number T81, 200 hours @ $29 per hour

direct labour: job number C40,300 hours @ $29 per hour

indirect labour: general factory clean-up, $1650

indirect labour: factory supervisory salaries,

$4300 Depreciation of the factory building and equipment during March amounted to $7300. Rent paid in cash for warehouse space used during March was $730. Electricity costs incurred during March amounted to $1395 The invoices for these costs were received, but the bills were not paid in March. March council rates and property taxes on the factory were paid in cash, $1460. Insurance cost covering factory operations for March was $2160 The insurance policy had been prepaid in February. Costs of salaries and on-costs for sales and administrative personnel paid in cash during March amounted to $3300. Depreciation on administrative office equipment and space amounted to $1650. Other selling and administrative expenses paid in cash during March amounted to $1000. Job number T81 was completed in March. Half the trombones in job number T81 were sold on credit during March for $200 each.

The 1 March balances in selected accounts are as follows

Account name	1March Balance
Cash	$3,000
Account receivable	$7,000
Pre paid insurance	$5,320
Raw Material inventory	$149,000
Manufacturing supplies inventory	$500
Work in process Inventory	$22,000
Finished Goods Inventory	$66,000
Accumulated depreciation: building and equipment	$102,000
Accounts payable	$13,000
Wages payable	$8,000

Required:

1. Calculate the company's predetermined overhead rate for the current year.

$885,500/44275=20 per hour

2. Prepare journal entries to record the events of March.

3. Set up ledger accounts, and post the journal entries made in requirement 2.

4. Calculate the overapplied or underapplied overhead for March. Prepare a journal entry to close this balance into cost of goods sold.

5. Prepare a schedule of cost of goods manufactured for March.

6. Prepare a schedule of cost of goods sold for March.

7. Prepare an income statement for March.

9. Analyse and describe the benefits of replacing Activity Base Costing (ABC).