Timeless Memory manufactures high quality handcrafted wooden colonial-styled furniture. The firm uses a job costing system and manufacturing overhead is applied on the basis of direct labour hours.

The budgeted manufacturing overhead for the current year is $900,000. In the budget, the firm plans to employ 10 craftsmen. These craftsmen are regarded as direct labour and they are budgeted to work 2,000 hours each during the year.

On 1 August, the company had the following balances:

Raw materials inventory Wood $55,000 Glue $200 (Wood is treated as direct material while glue as indirect materials)

Work in process Job number G60 $3,700

Finished goods Job number B50 $12,000

The following events took place during August:

(i) The firm made the following purchases: 3,000 metres of wood for $35,000. 5 litres of glue were purchased at a price of $20 per litre.

(ii) 1,000 metres of wood at a cost of $11 were issued to Job number G60 and 500 metres of wood at a cost of $12 were issued to Job number D92. However, the record on the usage of wood by Job number C81 was lost.

(iii) Time sheets showed the following use of use of labour:

Job number G60:100 hours of direct labour Job number C81:700 hours of direct labour Job number D92:200 hours of direct labour

The craftsman earns $20 per hour.

The firm also employs labourers who performed various tasks such as material handling and shop clean-up. Their wages for August amounted to $2,500

(iv) Other salaries

Production 15,000 Sales and administration 10,000

(v) Other costs Depreciation factory equipment 8,000 Depreciation delivery vans 5,000 Other factory costs 20,000 Other selling and administration costs 15,000

(vi) Spoilage and reworked costs

Job number G60: Normal spoilage with estimated disposal selling price of $350 was incurred. Job number C81: Normal spoilage amounting to $200 and abnormal spoilage of $80 were incurred. Job number D92: Rework cost of $300 was incurred.

(vii) Job number G60 and Job number C81 were completed in August and was transferred to the finished goods store. Job number D92 was incomplete at the end of the month.

Job number B50 was sold on credit in August at a gross profit margin of 40%.

(viii) The raw material inventory at 31 August were: Wood $22,000 Glue $110

Required:

(a) Write the journal entries to describe the following: (i) Issue of direct material to production and the direct labour incurred.

(ii) Manufacturing overhead incurred during the month.

(iii) Application of overhead to production.

(iv) The costs of spoilage, rework and scrap.

(v) Completion of job numbers G60.

(vi) The sale of job number B50.

(b) Determine the cost of the jobs that were still in production as at 31 August.

(c) Calculate the cost of the finished goods inventory as at 31 August.