Hellas Pty. Ltd had the following balances on the 1st of July 2013:

$

Materials Control (direct and indirect materials) 5000

Work in Process 10 000

Finished Goods 6000

Hellas Pty. Ltd. uses a Factory Ledger and during July the following transactions took place:

$

· Materials purchased: Direct materials $18 000

Indirect materials $ 3 000 21 000

· Materials issued during the month:

Direct Material 21 000

Indirect Material 2 600

· Total payroll for the period was paid in cash and amounted to $54 000. This was distributed as follows:

Assembly workers 42 000

Supervisor’s salary 8 000

Factory cleaner 4 000

· Other overhead incurred during the month was as follows:

Depreciation on machinery 8 000

Factory light and power 2 500

Other overhead incurred 1 500

Other information:

· Overhead is applied to production at 70% of the Direct Labour cost.

· The balance in the WIP account at the end of July was $13 000.

· During July goods costing $90 000 were sold.

· Goods are marked up at 80% on cost.

Required:

  1. Closing balance of Materials Control Account $__________________

(3 marks)

  1. Closing balance of Finished Goods Account $__________________

(3 marks)

  1. The total actual overhead incurred $__________________

(3 marks)

4.Calculate the amount of under applied or

over applied overhead. How should this

Amount be accounted for? Provide specific reasons for your proposals. (4 marks)

Show all relevant calculations and T accounts

Total marks for Question Three: 13

Question 4

The following information relates to the Mick Richards Company.

Beginning fixed manufacturing overhead in inventory $60,000

Ending fixed manufacturing overhead in inventory $45,000

Beginning variable manufacturing overhead in inventory $30,000

Ending variable manufacturing overhead in inventory $14,250

Fixed selling and administrative costs $724,000

Units produced 5,000

Units sold 4,800

Required:

What is the difference between operating profits under absorption costing and Variable costing? (8 marks)

Total marks for Question Four: 8