QUESTION 2 (20 marks)
ABC Pottery-works makes a variety of pottery products that it sells to various retailers. ABC Pottery-works uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate is based on machine-hours.
At the beginning of the year, the company’s management made the following estimates:
Job 109 was started on July 21 and completed on July 30. The company’s cost records show the following information concerning the job 109:
Direct labour hours
|
80
|
Machine hours
|
160
|
Direct materials cost
|
RM850
|
Direct labour cost
|
RM490
|
Units produced
|
10
|
At the end of the year, the records of the company revealed the following actual cost and operating data for all jobs worked on during the year:
Direct labour hours
|
10,000
|
Machine hours
|
65,000
|
Direct materials cost
|
RM430,000
|
Direct labour cost
|
RM108,000
|
Manufacturing overhead cost
|
RM550,000
|
Required:
Compute the predetermined overhead rate used during the year.
POHR= 550,000/10,000 DLH = RM55 PER DLH (4 marks)
Compute the total overhead cost applied to Job 109. (4 marks)
OH APPLIED TO JOB 109 = POHR x ACTUAL DLH
=RM55 PER DLH x 80 DLH = RM4,400
What would be the total cost recorded for job 109? (4 marks)
TOTAL COST =DM +DL+ OH APPLIED = 850 +490+4,400 = RM5740
What would be the cost per unit for job 109?
COST PER UNIT = TOTAL COST/ UNIT PRODUCE =RM5740/ 10=RM574 (3 marks)
What was the amount of under or over-applied overhead at the end of the year?
VARIANCE OH=RM550,000-(RM55 /160 x 65,000MH)
=RM527,657 over applied
(5 marks)
END OF QUESTION PAPER
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