QUESTION 4 (20 MARKS) Jackson Company uses a job costing system at its plant. Th

Question

QUESTION 4 (20 MARKS) Jackson Company uses a job costing system at its plant. The plant has two production departments Machining and Assembly. Its job-costing system has two direct cost categories (direct materials and direct manufacturing labour) and two manufacturing overhead cost pools (the Machining Department, allocated using machine hours and the Assembly Department, allocated using direct manufacturing labour costs). The 2012 budget for the plant is as follows: Manufacturing Overhead Direct manufacturing labour Direct manufacturing labour-hours Machine-hours Machining Dept. Assembly Dept. 800,000 $3,600,000 $2,000,000 200,000 200,000 $1,400,000 100,000 50,000 a) Calculate an overhead rate for each department. (2% marks) b) During the month of November, the cost record for Job #520 shows the following: Machining Dept. Assembly Dept. Direct material used Direct manufacturing labour costs Direct manufacturing labour-hours Machine hours $45,000 $14,000 1,000 2,000 S63,000 $15,000 1,500 1,000 What is the total manufacturing overhead allocated to Job #520? (2% marks) Given that selling, distribution and administrative costs are absorbed in each job cost at 20% of prime cost & that Job #520 required special design costs of$7,000, calculate the total cost and quotation price of Job #520, where a profit margin of 25 % is applied to the selling price of all jobs. c) (6 marks) d) Prepare the general jounal entries necessary to reflect the following transactions related to Job #520, using the total figures for: Direct materials used Direct labour cost incurred Special Design cost paid for by cash Manufacturing overheads applied -Production cost of job completed Selling price of the job (Assume a perpetual inventory system) (6 marks) e At the end of 2012, the company had actually incurred the following: Machining Dept. $2,100,000 $1,980,000 55,000 Finishing Dept. $3,700,000 $2,200,000 210,000 Manufacturing overhead incurred Direct manufacturing labour costs Compute the manufacturing overhead variance for each department and for the plant as a whole. Show the journal entry necessary to dispose of this total variance. (3 marks)

Explanation / Answer

c

d

Overhead Rate Machining Dept Manufacturing Overhead / Machine Hr =+1800000/50000 36 Assemby Debt Manufacturing Overhead / Direct labor Hr =+3600000/200000 18

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