At the beginning of September, Sunshine Ltd had two works in progress, work 01 and work 02,
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Question:
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:
- Calculate the pre-determined overhead rate based on direct labour cost.
- 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.
- Calculate the ending balances of work in process and finished goods as of 30 September.
- What is normal costing? How does it differ from actual costing? (2 marks)
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