Merbau Furniture is a main manufacturer of custom-made office furniture in Ipoh, Perak. The company applies...

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Merbau Furniture is a main manufacturer of custom-made office furniture in Ipoh, Perak. The company applies job order costing system, where each client's order is treated as separate job. The company currently uses the single rate of overhead absorption rate based on direct labour cost. Given below is the data for the period ended 31 January 2021: Machining Department 85,000 hours Budgeted direct labour hours Budgeted machine hours Budgeted manufacturing overhead 38,000 hours RM820,000 Actual direct labour hours 80,000 hours Finishing Department 65,000 hours 35,000 hours RM660,000 62,000 hours Actual machine hours Actual manufacturing overhead 32,000 hours RM747,500 30,000 hours RM567,500 The labour rate per hour in Machining Department and Finishing Department is RM3.50 and RM3.00 respectively. During January 2021, the company received 10 orders and one of the orders is known as Job No. 0121. The following data relates to the job: Job No. 0121 Direct materials: Machining Department Finishing Department Direct labour: Machining Department Finishing Department Hire of special machine: Administrative expenses Machine hours: Machining Department Machining Department Finishing Department RM19,500 RM10,000 1,000 hours 900 hours RM8,500 20% of manufacturing costs 700 hours 500 hours Required: a. Calculate overhead absorption rate (OAR) that is currently used by the company. (4 marks) b. Assuming the company is now considering to apply departmental overhead absorption rate (OAR), calculate OAR for each department using the following basis: Machining Department Finishing Department - Machine hour - Direct labour hour c. Calculate the amount of total overhead applied to Job No. 0121. (3 marks) (3 marks) d. Prepare a job cost sheet for Job No. 0121 by showing prime cost, production cost and total cost. (Note: Production overhead is absorbed based on departmental OAR). (7 marks) e. Calculate the selling price of Job No. 0121 if the profit margin is set at 25% on total cost. (3 marks) f. Determine under or over absorption of overhead for each department using departmental rate as calculated in (b). (5 marks) Merbau Furniture is a main manufacturer of custom-made office furniture in Ipoh, Perak. The company applies job order costing system, where each client's order is treated as separate job. The company currently uses the single rate of overhead absorption rate based on direct labour cost. Given below is the data for the period ended 31 January 2021: Machining Department 85,000 hours Budgeted direct labour hours Budgeted machine hours Budgeted manufacturing overhead 38,000 hours RM820,000 Actual direct labour hours 80,000 hours Finishing Department 65,000 hours 35,000 hours RM660,000 62,000 hours Actual machine hours Actual manufacturing overhead 32,000 hours RM747,500 30,000 hours RM567,500 The labour rate per hour in Machining Department and Finishing Department is RM3.50 and RM3.00 respectively. During January 2021, the company received 10 orders and one of the orders is known as Job No. 0121. The following data relates to the job: Job No. 0121 Direct materials: Machining Department Finishing Department Direct labour: Machining Department Finishing Department Hire of special machine: Administrative expenses Machine hours: Machining Department Machining Department Finishing Department RM19,500 RM10,000 1,000 hours 900 hours RM8,500 20% of manufacturing costs 700 hours 500 hours Required: a. Calculate overhead absorption rate (OAR) that is currently used by the company. (4 marks) b. Assuming the company is now considering to apply departmental overhead absorption rate (OAR), calculate OAR for each department using the following basis: Machining Department Finishing Department - Machine hour - Direct labour hour c. Calculate the amount of total overhead applied to Job No. 0121. (3 marks) (3 marks) d. Prepare a job cost sheet for Job No. 0121 by showing prime cost, production cost and total cost. (Note: Production overhead is absorbed based on departmental OAR). (7 marks) e. Calculate the selling price of Job No. 0121 if the profit margin is set at 25% on total cost. (3 marks) f. Determine under or over absorption of overhead for each department using departmental rate as calculated in (b). (5 marks)

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a Calculation of Overhead Absorption Rate OAR using Single Rate Machining Department Budgeted manufacturing overhead RM820000 Budgeted direct labor ho... View the full answer