Assignment - Job Costing

Cool Beat Sound (CBS) Ltd, which uses a normal costing system, has two jobs in process at the start of the year: job number 64 ($84 000) and job number 65 ($53 500).

(a) The company allocates manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $840 000 and 16 000 hours.

(b) The company worked on four jobs during the first quarter (i.e. from 1 January to 31 March). Direct materials used, direct labour incurred, and machine hours consumed were as follows:

(c) Manufacturing overhead incurred during the first quarter included depreciation ($34 000), indirect labour ($60 000), and other factory costs ($189 500).

(d) CBS Ltd completed job number 64 and job number 65. Job number 65 was sold on credit, producing a profit of $34 700 for the firm.

Required:

1. (a) What are the similarities and differences between actual costing and normal costing?

(b) Between actual costing and normal costing, which one is more commonly used? Why?

2. Determine the company's overhead rate.

3. (a) Calculate the costs of each job as of 31 March.

(b) Determine the ending balance of the Finish Goods inventory account and Work-In-Process inventory account as of 31 March.

4. Prepare the journal entries for the first quarter recording the following:

(a) Issue of direct materials to production.

(b) Direct labour incurred.

(c) Manufacturing overhead incurred during the quarter.

(d) Allocation of manufacturing overhead to production.

(e) Completion of job numbers 64 and 65.

(f) Sale of job number 65.

5. (a) When do under- or overallocated overhead costs occur?

(b) What are the causes of under- or overallocated overhead?

(c) Calculate the amount of under- or overallocated overhead of CBC Ltd for the first quarter. Show the journal entry to write off this amount to Cost of goods sold.