Select Page

PART (i)
Jackson Company uses a perpetual inventory system and 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:
Machining Dept.
Assembly Dept.
Direct manufacturing labour cost
Direct manufacturing labour-hours
Machine-hours
\$1,800,000
\$1,400,000
100,000
50,000
\$3,600,000
\$2,000,000
200,000
200,000
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
\$63,000
\$15,000
1,500
1,000
What is the total manufacturing overhead allocated to Job #520? (2 marks)

c) 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 mark-up of 33 1/3 % is applied to the selling price of all jobs. (6 marks)

d) Prepare the general journal 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
– Production cost of job completed
– Selling price of the job (6 marks)

e) At the end of 2012, the company had actually incurred the following:
Machining Dept.
Finishing Dept.
Direct manufacturing labour costs
Machine-hours
\$2,100,000
\$1,980,000
55,000
\$3,700,000
\$2,200,000
210,000
Compute the manufacturing overhead variance for each department and for the plant as a whole. Show the journal entry necessary to dispose of this variance. (3 marks)

PART (ii) (25 marks)
Gambler Company produces a product by way of three consecutive processes. The following data relates to Process 3 for the month of April.
During April, 30,000 units valued at \$29.55 each were transferred from Process 2 to Process 3.
Other costs incurred during the month were:
Direct Labour
\$309,000
\$458,600
\$391,400
Normal losses are estimated to be 5% of the units transferred in from Process 2. Inspection takes place during the processing operation, at which point bad units are separated from good units and sold as scrap at \$40 each.
At inspection, 4,000 units were rejected as scrap. These units had reached the following degree of completion:
Transfer from Process 2 100%
Conversion costs 60%
Work-in-progress at the end of April was 5,000 units and had reached the following degree of completion:
Transfer from Process 2 100%
Conversion costs 50%
There were no incomplete units in Process 3 at the beginning of the period.
Materials added and conversion costs are incurred evenly throughout the process.
Required:
(a) Complete the template given to determine the equivalent units for direct materials (From Process 2 & Materials added) and conversion costs. (10 marks)

(b) Compute the cost per univalent unit for direct materials and conversion costs. (4 marks)

(c) Compute:
The total cost of the units completed and transferred out
Cost of the unexpected losses
Cost of ending work in process inventory in Process 3. (3 marks)

(d) Prepare the Work in Process Inventory Process 3 T-account, clearly showing the ending balance. (4 marks)

(e) State the journal entries to record the assignment of direct materials and direct labour, the allocation of manufacturing overhead to the process and to record the cost of the units completed and transferred out to Finished Goods. (4 marks)