Brass Design Ltd manufactures brass musical instruments for use by high school students. The company uses a job costing system, in which manufacturing overhead is applied on the basis of direct labour hours. The company’s budget for the current year included the following predictions:
Budgeted total manufacturing overhead………………..$426,300
Budgeted total direct labour hours…………………………20,300
During March, the firm began two production jobs:
■ Job number Tat consisting of 76 trombones.
■ Job number C40, consisting of 110 cornets. The events of March are described as follows:
■ 1000 square metres of rolled brass sheet metal were purchased for $5000 on credit.
■ 400 kilograms of brass tubing were purchased on credit for $4000.
■ The following requisitions were filed on 5 March:
– Requisition number 112: 250 square metres of brass sheet metal @ $5.00 per square metre (for job number T81)
– Requisition number 113:1000 kilograms of brass tubing @ $10 per kilogram (for job number C40) – Requisition number 114:10 litres of valve lubricant @ $10 per litre
– All brass used in production is treated as direct material. Valve lubricant is an indirect material.
■ An analysis of labour time sheets revealed the following labour usage for March:
– Direct labour: job number Tat 800 hours @ $20 per hour
– Direct labour: job number C40. 900 hours @ $20 per hour
– Indirect labour: general factory clean up, $4000
– Indirect labour: factory supervisory salaries, moo
■ Depreciation of the factory building and equipment during March amounted to $12 000.
■ Rent paid in cash for warehouse space used during March was $1200.
■ Electricity costs incurred during March amounted to $2100. The invoices for these costs were received, but the bills were not paid in March.
■ March council rates and property taxes on the factory were paid in cash, $2400.
■ Insurance cost covering factory operations for the month of March was $3100. The insurance policy had been prepaid in February.
■ Costs of salaries and on-costs for sales and administrative personnel paid in cash during March amounted to $8000.
■ Depreciation on administrative office equipment and space amounted to $4000.
■ Other selling and administrative expenses paid in cash during March amounted to Moo.
■ Job number Tai was completed on 20 March.
■ Half the trombones in job number T81 were sold on credit during March for $700 each.
The 1 March balances in selected accounts are as follows:
Cash………………………………………………………………….$10,000
Accounts receivable…………………………………………………..21,000
Prepaid insurance………………………………………………………5,000
Raw material inventory……………………………………………..149,000
Manufacturing supplies inventory………………………………………500
Work in process inventory……………………………………………91,000
Finished goods inventory…………………………………………..220,000
Accumulated depreciation: buildings and equipment………………102,000
Accounts payable……………………………………………………13,000
Wages payable…………………………………………………………8,000
Required:
1. Calculate the company’s predetermined overhead rate for the current year.
2. Complete the following job cost sheet for job number MI.
3. Prepare journal entries to record the events of March.
4. Set up ledger accounts, and post the journal entries made in requirement 3.
5. Calculate the overapplied or underapplied overhead for March. Prepare a journal entry to close this balance into cost of goods sold.
6. Prepare a schedule of cost of goods manufactured for March.
7. Prepare a schedule of cost of goods sold for March.
8. Prepare an income statement for March.
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