GROUP Assignment$\_$ Product Costing

PART $1$

$(25$ marks$)$

Aubergine is a manufacturer of contemporary cases for tablets. The business uses a perpetual inventory system and has a highly labour$-$intensive production process, so it applies manufacturing overhead based on direct labour hours. Any overhead variance is deemed to be immaterial and therefore closed out to Cost of Goods Sold.

Aubergine's pre$-$determined overhead application rate for $2024$ was computed from the following data:

Total estimated factory overheads $\backslash$$$4,200,000$

Total estimated direct labour hours $\backslash (\backslash$quad $35,000\backslash )$

During the first month of $2024,$ the business recorded the following transactions.

i$)$ Purchased $\backslash (\backslash$$ $500,000\backslash )$ worth of materials on account. Separately, Aubergine paid a $\backslash (\backslash$$ $3,540\backslash )$ bill for freight in$.$

ii$)$ Incurred manufacturing wages of $\backslash$$$1,065,000$

iii$)$ Issued direct materials and used direct labour in manufacturing

iv$)$ Issued indirect materials to production, $\backslash (\backslash$$ $80,000\backslash )$

v$)$ Charged indirect manufacturing wages to production, $\backslash$$$159,750$

vi$)$ Depreciation expense on factory equipment used on the different jobs, $\backslash (\backslash$$ $300,000\backslash )$

vii$)$ Other overhead costs incurred on jobs A$-141$ to A$-144$ amounted to $\backslash$$$112,750$

viii$)$ Applied factory overhead to the various jobs using the pre$-$determined factory overhead rate.

ix$)$ Finished Jobs A$-141-$ A$-143$ and transferred to the finished goods inventory account

x$)$ Shipped Job A$-141$ and A$-142$ and billed customers at a margin of $\backslash (25\backslash \%\backslash )$ on cost$.$

Required:

a$)$ Compute Aubergine's predetermined manufacturing overhead rate.

$(1$ mark$)$

b$)$ Calculate the total manufacturing cost for each job.

$(3$ marks$)$

c$)$ Using the total figures, record the above transactions in the general journal.

$(9$ marks$)$

d$)$ Post the manufacturing overhead transactions to the Manufacturing Overhead T$-$account and state the balance on the account before closing the account. Show the journal entries necessary to dispose of this variance.

$(3$ marks$)$

e$)$ What is the balance in the Cost of Goods Sold account after the adjustment?

$(11/2$ marks$)$

f$)$ Calculate the gross profit earned by Aubergine for the month.

$(2$ marks$)$

g$)$ Post the appropriate entries to Work in Process Inventory Control account $\backslash$& determine the account balance on January $31,$ the end of the month.

$(\backslash (21/2\backslash )$ marks$)$

h$)$ State and explain three $(3)$ differences between a job costing system and a process costing system.

$(3$ marks$)$