Sunshine Company produces and sells custom made umbrellas. The company uses a job order costing system and applies manufacturing overhead cost to jobs on the basis of direct labor hours. Its predetermined overhead rate was based on a cost formula that estimated $400,000 of manufacturing overhead for an estimated allocation base of 1000 direct labor hours. The companys inventory balances on May 1 2019 were as follow:

Raw Materials

$ 32,000

Work in Process

$ 20,000

Finished Goods

$ 48,000

During the month the following transactions were completed:

Raw materials were purchased on account, $170,000.

Raw materials were issued into production, $180,000 (80% direct and 20% indirect).

Employee salaries and wages were accrued as follows: direct labor (875 hours), $200,000; indirect labor, $82,000; and selling and administration salaries, $90,000.

Utility costs were incurred in the factory, $65,000.

Advertising costs were incurred and paid, $100,000.

Prepaid insurance policy expired during the month, $20,000 (90% related to factory).

Depreciation for the month was recorded as $180,000 (85% related to factory assets)

Manufacturing overhead was applied to jobs.

Production of goods that cost $700,000 to complete has been sent to the showroom.

Sales for the month totaled $1,000,000 and were all on credit. The total cost to manufacture these goods according to their job cost sheets was $720,000.

Required:

Prepare journal entries to record the April 2018 transactions (20 marks).

Post the appropriate journal entries to the T-accounts of the inventory accounts and the Manufacturing Overhead account. Compute the ending balances of the accounts (7 marks).

Is Manufacturing Overhead over applied or under applied for the month? Prepare the appropriate journal entry for this amount (3 marks).

Job 007 was one of the many jobs started and completed during the year. The job required $10,500 in direct materials and 10 hours of direct labor time at a wage rate of $220 per hour. The job contained twenty units. If the company bills at a price 40% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer (5 marks)?

PART B

Sunshine Orange Juice is produced in two processing departments The Blending Department and the Bottling Department. The following information relates to the Blending Department for April 2018:

Units in process, April 1: 30,000 (Materials 100% complete, Conversion 60% complete).

Units started into production in April: BDT 420,000.

Units in process, 30 April: 80,000 (Materials 50% complete, Conversion 25% complete).

Cost data:

Working in process inventory 1 April:

Materials: $92,000; Conversion Cost: $58,000.

Cost added during April:

Materials: $851,000; Conversion Cost: $995,000.

Required:

Determine the Equivalent Units of Production (4 marks).

Compute the cost per equivalent unit (6 marks).

Determine the cost of ending work in process inventory and cost of units completed and transferred out (6 marks).

Prepare cost reconciliation (4 marks).

PART C

Sunshine Company sells sun umbrellas at a beach resort in the Maldives. Data concerning the company's cost, revenue and volume for the month of June 2019 are provided below:

Selling Price

$30

Variable Expenses:

Product cost

Sales commission (shop staff)

$14

$4

Fixed Expenses

$160,000 per month

Unit Sales

50,000 units

Required:

a. Calculate the break-even point (BEP) in units and sales dollars (4 marks).

b. Calculate and interpret the Contribution Margin ratio (4 marks).

c. Prepare a cost-volume-profit graph for the company for the month of June (4 marks).

d. What is the net income/loss for June 2019 (3 marks)?

e. In the following month, Sunshine Company is considering paying the shop manager an incentive of $1 per umbrella sold in addition to the break-even-point. This is expected to increase the unit sales by 20 percent. What will be the net income/loss of Sunshine Company if this change is made? Should this change be made (5 marks)?

PART D

With the use of graphs and examples explain the following concepts: Total Fixed Cost, Total Variable Cost and Mixed Cost. (15 marks)

Need part B, C and D only.