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:
- Closing balance of Materials Control Account $__________________
(3 marks)
- Closing balance of Finished Goods Account $__________________
(3 marks)
- 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