Amber Group uses job order costing. At the beginning of the year, the manager of the company
Question:
Amber Group uses job order costing. At the beginning of the year, the manager of the company estimates a fixed manufacturing overhead cost of $285,000 and a variable manufacturing overhead cost of $10.75 per direct labour hour. The manager also estimates that a total of 26,500 direct labour hours will be required for the coming year.
The following transactions took place during the year (all sales and purchases were on account).
Raw materials worth $530,000 were purchased for production purposes.
Raw materials worth $300,000 were requisitioned for the use in production (two-third of the amount was direct material and the remaining indirect material).
Due to higher level of production, the total direct labours worked for 27,300 hours, for the whole year. The labour were paid at a rate of $14.50 per hour.
The indirect labour cost amounted to $326,000.
Additional salaries of $267,000 were given to selling & admin staffs.
Utility bill for the factory totalled $8,000. Utility bill for the corporate office of Amber Grouptotalled another $8,000.
Depreciation cost incurred $325,000 (65% was factory machinery related and the remainder was office equipment related).
Advertising expenses of $42,600 were accrued and unpaid.
Maintenance cost for factory machinery incurred $20,000.
Rent expenses for Amber Group was $180,000, for the whole year. (80% of the building is factory and the rest in corporate office).
Manufacturing overhead was applied to all jobs.
1500 units were completed and transferred as finished goods, out of which 1000 units were sold to customers at a selling price of $1100 per unit.
What should be the value of Total Manufacturing Cost of Amber Group for all the jobs that were completed by the end of the year?
Calculate whether Manufacturing Overhead is Over Applied or Under Applied, explain your answer. Journalise the entry for MOH over/under applied.
Expert Answer:
Solution Predetermined overhead rate Estimated fixed manufacturing overheads Estimated direct labor ... View the full answer
