Cool Beat Sound (CBS) Ltd, which uses a job costing system, had two jobs in process at the start of the year: job number 64 ($84,000) and job number 65 ($53,500). The following information is available:
(a) The company applies 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, respectively.
(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 shown in the following table.
(c) Manufacturing overhead during the first quarter included depreciation ($34,000), indirect labour ($60,000), indirect materials used ($50,000) and other factory costs ($139,500).
(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. Determine the company’s predetermined overhead rate.
2. Prepare journal entries for the first quarter to record the following.
(a) Issue of direct material to production and the direct labour incurred.
(b) Manufacturing overhead incurred during the quarter.
(c) Application of manufacturing overhead to production.
(d) Completion of job numbers 64 and 65.
(e) Sale of job number 65.
3. Determine the cost of the jobs still in production as of March 31.
4. Did the cost of the finished goods inventory increase or decrease during the first quarter? By how much?
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