At the beginning of September, Sunshine Ltd had two works in progress, work 01 and work 02, with the following cost information:

work 01 work 02

Direct material $40,800 $12,000

Direct labour $9,600 $24,000

Applied overhead $3,120 $7,800

Total $56,640 $51,600

The balance of finished goods inventory on 1 September was $0.

During September, two new works, work 03 and work 04, were started. The following direct material and direct labour costs were added to the four jobs during September:

work 01 work 02 work 03 work 04

Direct material $2,500 $7,100 $1,800 $1,700

Direct labour $800 $6,400 $900 $560

At the end of September, work 01, 02 and 03 were completed. Only work 01 was sold.

Required:

1. Calculate the pre-determined overhead rate based on direct labour cost.
2. Prepare a work-order cost sheet for the four works. Show the balance as of 1 September as well as direct material and direct labour added in September. Allocate the overhead to the four works for the month of September and show the closing balance.
3. Calculate the ending balances of work in process and finished goods as of 30 September.
4. What is normal costing? How does it differ from actual costing? (2 marks)

Answer rating: 100% (QA)

a Predetermined Overhead Rate Total overhead applied to work 01 and work 02 3120 7800 10920 Total di... View the full answer