Ola Ltd, which uses a job costing system, had two jobs in process at the start of the year: Job L1 ($68,000) and Job L2 ($30 000). The following information is available: i) The company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $1,000,000 and 25,000 hours, respectively. ii) The company worked on three jobs during the first quarter (i.e. from 1 January to 31 March). Direct materials used, direct labour incurred and machine hours consumed were as shown in the following table: Job numbers Direct material Direct labour Machine hours L1 $15,000 $30,000 900
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Ola Ltd, which uses a
($68,000) and Job L2 ($30 000). The following information is available:
i) The company applies manufacturing
and machine activity for the year were anticipated to be $1,000,000 and 25,000 hours,
respectively.
ii) The company worked on three jobs during the first quarter (i.e. from 1 January to 31 March).
Direct materials used, direct labour incurred and machine hours consumed were as shown in the
following table:
Job numbers Direct material Direct labour Machine hours
L1 $15,000 $30,000 900
L2 - 33,000 1,600
L3 45,000 65,000 2,000
iii) Manufacturing overhead incurred during the first quarter was $215,000.
iv) Ola Ltd completed Job L1 and Job L2 during the first quarter. Job L2 was sold on credit, producing
a profit of $30,000 for the company.
Required:
a) Calculate the company’s predetermined overhead rate.
b) Calculate manufacturing overhead applied to production for the first quarter.
c) Determine the cost of jobs completed in the first quarter.
d) Determine the cost of the jobs still in process at the end of the first quarter.
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