QUESTION TWO $(20$ marks, $32$ minutes$)$

Precision Manufacturing uses a normal costing system. The following data are for $2007$:

Machine$-$hours data and the ending balances $($before the disposition of the manufacturing

overhead variance$)$ are as follows:

Required:

Assume the year end variance in manufacturing overhead is material. Prepare the

journal entry to dispose the variance. Show all your calculations. $(6$ marks$)$

Provide a detailed explanation of what caused the variance. $(6$ marks$)$

The company produces a product that requires $$50$ of materials $($of which $$2$ is

classified as indirect materials$),$ $$20$ of direct labour and $2$ machine hours.

Calculate the unit cost of the product assuming the company uses an actual

costing system. $(4$ marks$)$