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NCEA LEVEL 3 ACCOUNTING

By Elizabeth Pitu

2013

BOOK 2

JOB COSTING

Notes, Examples and Exercises

Exercise Solutions

Level 3 Accounting JOB COSTING page 1

Distinguishing Costs

Exercises A-C – No Answers provided – page 4

Source Documents – page 10

Materials requisition

(a) The purpose of preparing and using a materials requisition is to ensure that materials are only

issued from the store to the actual jobs that are in process.

(b) The materials requisition has a number so that each requisition can be accounted for. It

provides a check on the stores that all materials have been issued with a requisition so the costs

can be charged to jobs or overhead as appropriate.

(c) It is important to record Job No. 51 on the requisition as the materials on the requisition must be

added to the cost of Job No. 51 not some other job.

(d) After Charge to if the materials being issued were indirect materials would be overhead.

(e) The date adds an extra form of control over the issue of the materials as the production manager

can check that the Job No. on the requisition was actually being worked on on that date.

(f) The quantity of each material is identified so stores can up-date their records with how much of

the material has been used, and therefore how much will be left in stores. It is also a check for

the production manager that an appropriate amount of material has been issued for the

particular job. The stock number identifies the stock in the computer programme so the correct

records are updated for the material taken from the stores. A description helps ensure the right

material will be issued for the job. The unit cost and amount provide the cost to add to the job

cost card for Job No. 51.

(g) Two signatures required as the production supervisor must authorise the issue of the materials

to the job but a worker goes to retrieve them and signs the requisition to show he has received

the materials from the store as required by the production supervisor.

(h) The information on the materials requisition contributes to accurate costing of jobs in progress

as it details exactly how much of each item of materials has been used and how much the

materials cost so the correct cost for materials can be added to the job cost card.

Time sheets

Time sheets are many and varied – the time sheet should enable the collection of data regarding

hours spent by each employee on different jobs and idle time

The time sheet is essential for accurate costing of jobs in progress as it will detail the hours each

employee has spent on each job in progress. This allows the accounts clerk/production manager to

add the correct amount for direct labour to each job in progress. It also allows the accounts

clerk/production manager to monitor time spent on each job to ensure it is reasonable for the job

being undertaken. This is important so jobs are not overcharged to customers by having too much

labour cost added. Also the cost of idle time can be monitored and added to the overhead costs for

the month.

Job Cost Cards

1. The purpose of preparing and using a job cost card is to collect in one place all of the direct

costs for materials and labour associated with the job and to add an allocation of overhead to the

cost of the job. This is important so that jobs are costed fairly and accurately and the firm’s

costs and prices will enable the firm to earn a profit at the same time as keeping the firm

competitive in the market.

2. The job cost card has a job number so that each job is separately identified and all jobs can be

accounted for.

3. It is important to record the document references on the job cost card as the production manager

may need to check back to the documents to ensure the costing on the job cost card is accurate

and that the materials and labour charges are reasonable for the type of job undertaken.


4. The date column assists the production manager to see how long jobs take and when materials

were requisitioned, as well as how long employees spent each day on the job. It provides an

additional check against documents such as the materials requisition and time sheets.

5. The labour and overhead are both recorded from the Time Sheets because the overhead will be

allocated to the jobs based on the direct labour hours.

6. Answered in 1 above.

Complete the invoice

Total Engineering Tax Invoice 5691

PO Box 32, Whakatane GST # 56-239-592

Invoice to: Date: Kids Books

Main Road, Waihi Customer Order No.

Description Qty Unit price Amount $

Display stand 1 481.60 481.60

Sub-total 481.60

GST 72.24

Total $ 553.84

Your Turn Streetsmart Shoes – page 16

Part A

Overhead rates:

Cost driver Calculation Overhead rate

Materials 300/450 66 2/3 % of materials

Labour cost

300/750

40% of labour cost or

40c per $1 of labour

Labour hours 300/75 $4 per labour hour

Machine hours 300/60 $5 per machine hour

Part B

Costs included in Job 372

Cost driver Rate to apply Materials Labour Overhead Total cost

Labour cost 40% of labour cost

0.4 x 9,000 6,000 9,000 3,600 18,600

Labour

hours

$4 per labour hour

4 x 800 6,000 9,000 3,200 18,200

Machine

hours

$5 per machine hour

5 x 600 6,000 9,000 3,000 18,000


Exercise One

Bug Toys

Overhead rates

Department M 54/36 = $1.50 per machine hour

Department F 60/50 = $1.20 per labour hour

Bug Toys Cost Card Job 490

Machining

Department

Finishing

Department

Total cost

Materials 2,120 7,600 9,720 Labour 2,880 5,760 8,640 Overhead 240 360 600 Total 18,960

Unit cost $7.90

Your Turn

Anita’s Chocolate Factory

Overhead rate 930/120 = $7.75 per machine hour

Overhead applied $7.75 x 124,000 = 961,000

Overhead incurred 963,000

Under-applied overhead 2,000

Streetsmart Shoes – continued

Part C

Base Rate Overhead applied Actual

overhead

Difference Under/Over

applied

Materials

cost

66 2/3% of

cost

66 2/3 % x 540,000 =

$360,000

$340,000 $20,000 Over applied

Labour

cost

40% of

cost

0.4 x 880,000 =

$352,000

$340,000 $12,000 Over-applied

Labour

hours

$4 x hours $4 x 84,000 =

$336,000

$340,000 ($4,000) Under-applied

Machine

hours

$5 x hours $5 x 70,000 =

$350,000

$340,000 $10,000 Over-applied

Which overhead rate to use?

Streetsmart Shoes should use the labour hours rate as it provides the smallest variance between

applied overhead and actual overhead. This indicates that most of the overhead is likely to be

generated from the number of hours worked on jobs. The other overhead rates provide significant

over-charging of jobs and could easily lost Streetsmart Shoes customers if it overcharges for its

shoes on a consistent basis. While the $4,000 under-applied overhead is also significant, and will

reduce profit by $4,000 plus the mark-up applied to the finished shoes, it is much less that the

$10,000 over-applied using machine hours and the other rates which produce even higher results of

over-applied overhead. Streetsmart Shoes may need to revise and monitor its budget for the

following year to make sure the overhead rate based on labour hours will minimise under- or over-

applied overhead so profit is not lost by under-applied overhead and prices are not too high by over-

applied overhead.


Exercise One Bug Toys continued – page 21

Department Rate Overhead

applied

Actual

overhead

Difference Under/Over

applied

Machining $1.5 per

machine hour

$1.5 x 37,200 =

$55,800 $55,500 $300 Over-applied

Finishing

$1.2 per

labour hour

$1.2 x 51,000 =

$61,200 $62,300 ($1,100) Under-applied

Exercise Two – page 21

Hockey Rulz

(a) Overhead rates

Machining 240/60 = $4 per machine hour

Finishing 150,000/18,750 = $8 per labour hour

(b) Cost of Job 172

Machining Finishing Total cost

Materials 3,600 700 4,300

Labour 100 300 400

Overhead 400 120 520

Totals 4,100 1,120 5,220

Unit cost $5.22 per hockey ball

(c) Applied overhead in machining 6,300 x $40 = 252,000

Actual overhead incurred in machining 250,000

Over-applied overhead in machining 2,000

Applied overhead in finishing 19,100 x $8 = 152,800

Actual overhead incurred in finishing 150,100

Over-applied overhead in finishing 2,700

(d) It is important for Hockey Rulz to continually monitor under- and over-applied overhead to

ensure that costs of hockey sticks, hockey balls, and hockey gear are competitive in the market so

Hockey Rulz remains a viable business able to sell its hockey gear. If overhead is over-applied then

the sticks, balls and other gear could end up being over-priced in the market and customers might

go elsewhere for their hockey needs. If overhead is under-applied then Hockey Rulz may not make

as much profit as expected or could end up making a loss. Hockey Rulz needs to make a reasonable

profit to remain a viable business as well as being competitive in the market. Therefore it is

important to monitor overhead budgets against actual results to ensure as near as possible given

budgets can never be 100% accurate, all overhead will be recovered through the accurate costing

and competitive pricing of the production of sticks, balls and gear.

Exercise Three – page 22

Mainly Cane Ltd

Direct Materials

Overhead Work-in-progress

Finished Goods

Direct Labour Cost of Goods Sold


(b) Machining overhead costs 60 + 40 + 30 = 130,000

Machine hours 20,000

Overhead rate $6.50 per machine hour

Assembly overhead costs 32 + 12 + 16 = 60,000

Labour hours 30,000

Overhead rate $2.00 per labour hour

(c) Job 97

Machining Assembly Total cost

Materials 700 200 900

Labour 278 426 703

Overhead 98 46 144

Totals 1,075 672 $ 1,747

(d) Applied overhead in machining 21,500 x $6.50 = 139,750

Actual overhead incurred in machining 136,000

Over-applied overhead in machining 3,750

Applied overhead in finishing 32,000 x $2.00 = 64,000

Actual overhead incurred in finishing 65,500

Under-applied overhead in finishing 1,500

(e) Under- or over- applied overhead occurs because overhead is applied to jobs using a rate which

is based on estimates of overhead and cost drivers for the year. Actual results of both overhead

incurred and the cost driver (eg labour hours) will always differ to some extent from budget figures.

This results in applied overhead being different from actual overhead incurred. It is important for

Mainly Cane Ltd to minimise the amount of under- or over-applied overhead by careful monitoring

of overheads and their allocation to jobs. Over-applied overhead means jobs could be priced higher

than is necessary to recover costs and make the desired profit. This could mean Mainly Cane Ltd

does not remain competitive in the furniture market. Under-applied overhead means jobs could be

under-priced and Mainly Cane Ltd could be making less profit or even a loss which long term is not

sustainable for the business.


Exercise Four – page 23

Wild Woodworks

Overhead rate in Assembly Overhead rate in Finishing

270/18 = $15 per machine hour 504/42 =$12 per labour hour

(a) The materials requisition is important as it shows how many metres of treated timber were needed for

the outdoor tables and how many bolts and screws. This allows the correct cost of the materials needed

to make the outdoor tables to be added to the cost of Job 65.

(b) The time sheets that detailed labour hours used on Job 65 are important so that the correct number of

hours are used to determine the cost of the direct labour in both the assembly and finishing departments

and the correct amount of overhead can be applied in the finishing department where labour hours are

the cost driver. The time sheets showing the machine hours used in Job 65 in assembly are important so

the correct amount of overhead can be applied to the Job while it was worked on in the assembly

department, where machine hours are the cost driver for allocating the overhead to the jobs.

(c)

Job 65 Assembly Finishing Total

Materials 4,000 1,000 5,000

Labour 450 630 1,080

Overhead 360 360 720

Totals 4,810 1,990 6,800

(d)

Wild Woodworks Tax Invoice 5684

GST # 65-289-246

Invoice to: Outdoors Ltd Date: 29 July

Description Amount $

wooden tables 10,880

Sub-total 10,880

GST 1,632

Total $ 12,512

(e) Assembly Finishing

Applied overhead Applied overhead

20*15 = $300,000 45*12 = $540000

Actual = $290,000 Actual = $545,000

Over-applied $10,000 Under-applied $5,000

(f) Under or over applied overhead occurs because we apply overhead to jobs based on a budget rate that is

calculated at the beginning of the year from budgeted figures for overhead expenses and expected level of

activity. As the actual results will vary from overhead there will be under or over applied overhead.

(g) Wild Woodworks needs to monitor its under- or over-applied overhead to ensure the budgeted overhead

rate being applied in each department is minimising the amount of under- or over-applied overhead.

The $10,000 over-applied in assembly is a significant amount and reasons why the machine hours

increased by 11% while overhead only increased by 7% should be investigated. Wild Woodworks may

have invested in new machinery/tools which do not require as much maintenance or are more

fuel/power efficient so the budget for the next year will have to reflect this in terms of expected

expenses versus expected machine hours. Over-applied overhead means too much cost is being added

to jobs in the assembly department and could lead to them being over-priced in a competitive market for

furniture. The under-applied overhead in finishing is not as significant but should still be monitored as

it means not all overhead costs are being recovered in finishing. The $5,000 under-applied in finishing

does, however, go some way to offsetting the impact of the $10,000 over-applied in assembly in terms

of recovering costs, making a profit and remaining competitive in the market in terms of pricing based

on cost.


Exercise Five – page 24

Pinewood Ltd

(a) Overhead rates – Assembly total overhead 108,000/30,000 = $3.60 per machine hour

Finishing total overhead 96,000/32,000 = $3 per labour hour

(b) In the assembly department most of the overhead such as factory depreciation and heat, light

and power, will be generated by the use of machinery, so machine hours is the best way to

allocate overhead in this department. In the finishing department most of the overhead will be

generated by the number of hours workers work (labour hours) so that is the best way to

allocate overhead.

(c) Job 65

Assembly Finishing Totals

Materials 3,900 700 4,600 Direct Labour 5,600 10,340 15,940

Overhead 1,800 1,410 3,210 Totals 11,300 12,450 23,750 Unit cost

475

(d) The tables are first assembled in the assembly department where most of the direct material

such as pine/timber will be added to the job. We see this as $3,900 of materials is added here

compared to only $700 in finishing where the material may only be wood stain. Direct labour

is added in assembly based on the time the workers take to assemble the job with the use of the

power tools and equipment. More worker hours/time is needed in finishing, direct labour cost

being $8,400 compared to only $5,600 in assembly, as the tables must be stained by hand which

takes longer. Overhead in assembly is added based on machine hours as the use of power tools

and equipment/machinery in the assembly department generates most of the overhead expenses

here such as power. Overhead in finishing is added based on labour hours as the overhead

generated in this department will mostly be associated with how long the workers take to stain

the tables. For example they will use more cleaning materials for brushes and hands the longer

the job takes. The final cost of the job is the sum of all of the direct costs of materials and

labour in each department plus the allocation of overhead from each department. This total cost

accounts for all of the costs, both direct and indirect, associated with the production of 50

dining table and chair sets.

(e) Pinewood Tax Invoice 547

GST # 61-225-976

Invoice to: Forlongs Date: 29/07/2006

PO Box 5941, Frankton

Description Qty Unit price

Amount $

dining suites 50 800 40,000

Sub-total 40,000

GST 6,000

Total $ $46,000

(e) A job cost system is suitable for Pinewood because each job or batch is easily separated in

terms of the material needed and the time the workers work on the job in each department.

This means direct material and direct labour costs can easily be added to each separate job or

batch of furniture. Overhead can be allocated to the jobs using appropriate cost drivers for

each department (see answer to b).


Exercise Six – page 25

Rata Teeshirts

Overhead rate Sewing department Overhead rate Printing department

$40 per machine hour 70% of direct labour cost

(1) Job 122

Started 24-Jul Transferred 31-Jul Sold 8-Aug

Sewing Department Printing Department

Materials Labour Overhead Materials Labour Overhead

$ $ $ $ $ $

1,500 1,000 80 300 800 560

Total sewing department 2,580 Total printing department 1,660

Total cost of job $4,240

Job 123

Started 5-Aug Transferred 12-Aug Sold 21-Aug



$ $ $ $ $ $

2,600 1,800 120 500 1,200 840


Total cost of job $7,060

(2) Job 124

Started 14-Aug Transferred 23-Aug Sold



$ $ $ $ $ $

5,000 3,400 200 900 2000 1,400


Job 125

Started 24-Aug Transferred Sold



$ $ $ $ $ $

12,000 8,000 280

Total sewing department 20,280 Total printing department


General Journal

3 Work-in-progress – Printing 300

Raw Materials 300

4 Work-in-progress – Sewing 2,600

Raw Materials 2,600

5 Work-in-progress – Printing 8,600

Work-in-progress – Sewing 8,600

6 Work-in-progress – Sewing 280

Factory Overhead 280

7 Cost of Goods Sold 7,060

Finished Goods 7,060

8 Accounts Receivable 9,752

Sales 8,480

GST 1,272

General Ledger

9 Raw Materials

01/08 Balance 9,000 Dr

31/08 Accounts Payable 26,000 35,000 Dr

Work-in-Progress – Sewing 21,100 13,900 Dr

Work-in-Progress – Printing 1,700 12,200 Dr

10 Work-in-Progress

01/08 Balance 0 Dr

31/08 Materials 21,100 21,100 Dr

Labour 14,200 35,300 Dr

Overhead Control 680 35,980 Dr

Finished Goods 15,700 20,280 Dr

11 Work-in-Progress


31/08 Materials 1,700 4,280 Dr

Labour 4,000 8,280 Dr

Overhead 2,800 11,080 Dr



12 Cost of Goods Sold

31/08 Finished Goods 22,480 22,480 Dr

Overhead 200 22,280 Dr

Income Summary 22,280 0 Dr

13 Overhead under/over applied

Sewing Department

Actual 630

Applied 680

Over-applied 50

Printing Department

Actual 2,650

Applied 2,800

Over-applied 150

Exercise Seven – Using Standard Cost Specifications – page 26

(a)

Batch Cost Specification

Item Bryony Bears Number in Batch 60

Particulars Unit cost Amount

Bear materials and clothes 4.00 240.00

Talking mechanisms 4.00 240.00

Direct Labour 11.25 675.00

Overhead Applied ($3 per DLH) 2.25 135.00

Total $21.50 $ 1,290.00

(b)

Batch Cost Specification

Item Tommy Bear Number in Batch 80

Particulars Unit cost Amount

Bear materials and clothes 2.00 160.00

Talking mechanisms 4.00 320.00

Direct Labour 7.50 600.00

Overhead Applied ($3 per DLH) 1.50 120.00

Total $15.00 $ 1,200.00

During September 12 batches of Bryony and 8 batches of Tommy were completed.


(c)

Total production costs

Bear materials and clothes 4,160

Talking mechanism 5,440

Total materials 9,600

Direct Labour Cost 12,900

Overhead Applied 2,580


(d)

Best Bears Tax Invoice 76821

Business address GST # 24-382-397

Invoice To: Date:

The Warehouse

Customer Order No.

Description Qty Unit $ Amount $

Byrony bears 100 30.10 3,010.00

Tommy bears 70 21.00 1,470.00

Sub total 4,480.00

Plus GST 560.00

Total $ $5,040.00


Exercise Eight – page 27

Fine Furniture

General Journal

Date Particulars Debit Credit

Raw Materials 320,000

GST 48,000

Accounts Payable 368,000

(Purchase of raw materials on credit)

Work-in-Progress 340,000


(Issue of direct materials to production)

Factory Overhead Control 4,000

Raw Materials 4,000

(Indirect materials charged to overhead)


Payroll Control 245,000

(Direct labour charged to production)



(Indirect labour charged to overhead)


Factory Rates 9,000

Factory depreciation 40,000

General Factory Expenses 72,000

(factory expenses charged to overhead)



(Overhead applied to production)



(Completed production transferred to Finished Goods)

Cost of Goods Sold 685,000


(the cost of finished goods sold)

Accounts Receivable 1,380,000

Sales 1,200,000

GST 180,000

(the selling price of finished goods sold on credit)



(transfer of over-applied overhead)


Fine Furniture ‘T’ Format

RAW MATERIALS

Apr 1 Balance 85,000 June 30 Work-in-Progress 340,000

June 30 Accounts Payable 320,000 Overhead Control 4,000

Balance 61,000

$405,000 $405,000

July 1 Balance 61,000

WORK-IN-PROGRESS

Apr 1 Balance 90,000 June 30 Finished Goods 700,000

June 30 Materials 340,000 Balance 109,750

Labour 245,000

Overhead Control 134,750

$809,750 $809,750


PAYROLL/LABOUR CONTROL

June 30 Wages/bank 253,000 June 30 Work-in-Progress 245,000

Overhead control 8,000

$253,000 $253,000

FACTORY OVERHEAD CONTROL

June 30 Raw Materials 4,000 June 30 Work-in-Progress 134,750

Labour 8,000

Factory Depreciation 40,000

Factory rates 9,000

Factory expenses 72,000

COGS over-applied 1,750

$134,750 $134,750

FINISHED GOODS CONTROL

Apr 1 Balance 60,000 June 30 Cost of Goods Sold 685,000

June 30 Work-in-

Progress 700,000 Balance 75,000

$760,000 $760,000


COST OF GOODS SOLD

June 30 Finished Goods 685,000 June 30 Factory overhead 1,750

Income summary 683,250

$685,000 $685,000

SALES

June 30 Income summary 1,200,000 June 30 Accounts Receivable 1,200,000

$1,200,000 $1,200,000


Fine Furniture ‘Three Column’ Format

Raw Materials

01/04 Balance 85,000 Dr


Work-in-Progress 340,000 65,000 Dr

Factory Overhead Control 4,000 61,000 Dr

Work-in-Progress

01/04 Balance 90,000 Dr

30/06 Raw Materials 340,000 430,000 Dr

Labour 245,000 675,000 Dr



Labour/Payroll Control

30/06 Bank 253,000 253,000 Dr


Factory Overhead Control 8,000 0

Factory Overhead Control

30/06 Raw Materials 4,000 4,000 Dr

Labour 8,000 12,000 Dr

Factory Depreciation 40,000 52,000 Dr

Factory Rates 9,000 61,000 Dr

Factory Expenses 72,000 133,000 Dr

Work-in-Progress 134,750 1,750 Cr

Cost of Goods Sold over-applied 1,750 0

Finished Goods Control

01/04 Balance 60,000 Dr

30/06 Work-in-Progress 700,000 760,000 Dr

Cost of Goods Sold 685,000 75,000 Dr

Cost of Goods Sold


Factory overhead control 1,750 683,250 Dr

Income Summary 683,250 0

Sales

30/06 Accounts Receivable 1,200,000 1,200,000 Cr

Income Summary 1,200,000 0


Exercise Nine A – page 28

Beta Boats

General Journal



GST 34,500
















Work-in-Progesss 500,000





Accounts Receivable 655,500

Sales 570,000

GST 85,500




(transfer of under-applied overhead)


‘T’ Form format

Beta Boats

RAW MATERIALS

Jan 1 Balance 120,000 Mar 31 Work-in-Progress 240,000

Mar 31 Accounts Payable 230,000

Balance 110,000

$350,000 $350,000

Apr 1 Balance 110,000

WORK-IN-PROGRESS

Jan 1 Balance 50,000 Mar 31 Finished Goods 500,000

Mar 31 Materials 240,000 Balance 115,000

Labour 195,000


$615,000 $615,000



Mar 31 Wages/bank 195,000 Mar 31 Work-in-Progress 195,000

$195,000 $195,000


Mar 31 Factory expenses 135,000 Mar 31 Work-in-Progress 130,000


$135,000 $135,000


Jan 1 Balance 65,000 Mar 31 Cost of Goods Sold 475,000

Mar 31 Work-in-Progress 500,000 Balance 90,000

$565,000 $565,000


COST OF GOODS SOLD

Mar 31 Finished Goods 475,000 Mar 31 Income summary 480,000

Factory overhead 5,000

$480,000 $480,000

SALES

Mar 31 Income summary 570,000 Mar 31 Accounts Receivable 570,000

$570,000 $570,000


Beta Boats Three Column Format

Raw Materials

01/01 Balance 120,000 Dr



Work-in-Progress

01/01 Balance 50,000 Dr

31/03 Raw Materials 240,000 290,000 Dr

Labour 195,000 485,000 Dr




31/03 Bank 195,000 195,000 Dr

Work-in-Progress 195,000 0 Dr


31/03 Factory Expenses 135,000 135,000 Dr


Cost of Goods Sold under-applied 5,000 0


01/01 Balance 65,000 Dr



Cost of Goods Sold




Sales

31/03 Accounts Receivable 570,000 570,000 Cr



Exercise Nine B – page 28

Alpha Manufacturing

General Journal



GST 3,300







Raw Materials 7,000









GST 1,750


(accrued factory expenses charged to overhead)





Work-in-Progesss 56,000

(Completed production transferred to Finished

Goods)





Sales 80,000

GST 12,000




(transfer of under-applied overhead)


’T’ Form format

Alpha Manufacturing

RAW MATERIALS

Balance 10,000


Accounts Payable 22,000 Overhead Control 7,000

Balance 8,000

$32,000 $32,000

Balance 8,000

WORK-IN-PROGRESS

Balance 4,000 Finished Goods 56,000

Materials 17,000 Balance 19,000

Labour 30,000


$75,000 $75,000

Balance 19,000


Wages/bank 36,000 Work-in-Progress 30,000


$36,000 $36,000


Raw Materials 7,000 Work-in-Progress 24,000

Labour 6,000 Cost of goods sold 3,000


$27,000 $27,000


Balance 8,000 Cost of Goods Sold 48,000

Work-in-Progress 56,000 Balance 16,000

$64,000 $64,000

Balance 16,000

COST OF GOODS SOLD

Finished Goods 48,000 Income summary 51,000

Factory overhead 3,000 $51,000 $51,000

SALES

Income summary 80,000 Accounts Receivable 80,000

$80,000 $80,000


Alpha Manufacturing Three Column Format

Raw Materials

Balance 10,000 Dr

Accounts Payable 22,000 32,000 Dr



Work-in-Progress

Balance 4,000 Dr

Raw Materials 17,000 21,000 Dr

Labour 30,000 51,000 Dr




Bank 36,000 36,000 Dr


Factory Overhead Control 6,000 0


Raw Materials 7,000 7,000 Dr

Labour 6,000 13,000 Dr



Cost of Goods Sold over-applied 3,000 0


Balance 8,000 Dr



Cost of Goods Sold




Sales

Accounts Receivable 80,000 80,000 Cr


Materials requisition

Pre-numbering of documents allows them all to be accounted for – so each materials requisition is accounted for and the materials requisitioned for jobs are all able to be costed to the correct job.

Key items of information on the materials requisition are the job no. the materials are to be used on, the actual quantity of the material being taken from stores for the job, the production supervisors signature authorising the issue of the materials to the job, signature of the employee receiving the materials from stores as evidence they were taken for a legitimate job.

The materials requisition authorises the issue of materials to jobs (direct materials)/overhead (indirect materials). It ensures materials are only issued for actual jobs being worked on and cannot be taken by stores personnel for their own use.


Exercise Ten – page 29

General Journal – Waikete Manufacturing


Sep-30 Raw Materials 180,000

GST 27,000



Work-in-progress 189,000




Raw Materials 8,000



Bank 162,000

(Payroll incurred)







Administration and Sales Salaries 47,000


(administration and sale salaries charged)


Factory Insurance 2,000














Sales 480,000

GST 72,000


Factory Overhead Control 500

Cost of Goods Sold 500

(transfer of over-applied overhead)


Waikete Manufacturing – General Ledger ‘T’ Form format

RAW MATERIALS

Sep 1 Balance 55,000 Sep 30 Work-in-Progress 189,000

30 Accounts Payable 180,000 Overhead Control 8,000

Balance 38,000

$235,000 $235,000

Oct 1 Balance 38,000

WORK-IN-PROGRESS

Sep 1 Balance 33,000 Sep 30 Finished Goods 291,000

30 Materials 189,000 Balance 67,500

Labour 91,000


$358,500 $358,500



Sep 30 Wages/bank 162,000 Sep 30 Work-in-Progress 91,000


Sales/Admin salaries 47,000

$162,000 $162,000


Sep 30 Raw Materials 8,000 Sep 30 Work-in-Progress 45,500

Labour 24,000


Factory rates 2,000


COGS over-applied 500

$45,500 $45,500


Sep 1 Balance 70,000 Sep 30 Cost of Goods Sold 303,000

30 Work-in-Progress 291,000 Balance 58,000

$361,000 $361,000


COST OF GOODS SOLD

Sep 30 Finished Goods 303,000 Sep 30 Factory overhead 500

Income summary 302,500

$303,000 $303,000

SALES

Sep 30 Income summary 480,000 Sep 30 Accounts Receivable 480,000

$480,000 $480,000


Waikete Manufacturing Three Column Format

Raw Materials

01/09 Balance 55,000 Dr




Work-in-Progress

01/09 Balance 33,000 Dr

30/09 Raw Materials 189,000 222,000 Dr

Labour 91,000 313,000 Dr




30/09 Bank 162,000 162,000 Dr



Sales/Admin Salaries 47,000 0


30/09 Raw Materials 8,000 8,000 Dr

Labour 24,000 32,000 Dr


Factory Rates 2,000 40,000 Dr


Work-in-Progress 45,500 500 Cr

Cost of Goods Sold over-applied 500 0


01/09 Balance 70,000 Dr



Cost of Goods Sold


Factory overhead control 500 302,500 Dr


Sales




Exercise Eleven – page 30

Fantastic Plastics

Answer shows relevant numbers only - can be presented as ledger accounts or job sheets or other

Job

Number

Open

balance

Materials

$

Labour

$

Overhead Finished

Goods

Close

balance

301 3,000 3,000 500 2,800 9,300

302 5,000 1,000 4,200 10,200

303 7,500 2,000 7,000 16,500

304 2,000 700 2,800 5,500

totals $3,000 $17,500 $4,200 16,800

Fantastic Plastics ‘T’ Form format

General Ledger

RAW MATERIALS

Mar 1 Balance 23,000 Mar 31 Work-in-Progress 21,000

31 Accounts Payable 25,000

Balance 27,000

$48,000 $48,000


WORK-IN-PROGRESS

Mar 1 Balance 3,000 Mar 31 Finished Goods 36,000

31 Materials 17,500 Balance 5,500

Labour 4,200


$41,500 $41,500



Mar 1 Balance 9,000 Mar 31 Cost of Goods Sold 28,500

31 Work-in-Progress 36,000 Balance 16,500

$45,000 $45,000


COST OF GOODS SOLD

Mar 31 Finished Goods 28,500 Mar 31 Income summary 28,900

Overhead under-applied 400

$28,900 $28,900

SALES

Mar 31 Income summary 57,000 Mar 31 Accounts Receivable 57,000

$57,000 $57,000


Fantastic Plastics – Three Column Format

Raw Materials

01/03 Balance 23,000 Dr



Work-in-Progress


31/03 Materials 17,500 20,500 Dr

Labour 4,200 24,700 Dr

Overhead Control 16,800 41,500 Dr





Cost of Goods Sold 400 0





Cost of Goods Sold


Factory overhead control 400 28,900 Dr


Sales



(e)

Fantastic Plastics

Profit Statement for March

Sales 57,000

Less cost of goods sold 28,900

Gross profit 28,100

Less expenses 9,200

Profit for March $18,900

(f) The $400 under-applied overhead means jobs are under-priced by $800 excluding GST (400 plus 100% mark-up). Therefor profit for March is $800 less than it would have been if all overhead incurred had been allocated to the jobs. Sales would have been $57,800 excluding GST, gross profit $28,900 and profit for March $19,700 which is $800 less than the $18,900 shown above. (g) Review of overhead rates is to ensure that overhead incurred is nearly all being allocated to jobs (as near as possible) so that profit is not being eroded by under-pricing jobs when overhead is under-applied and sales are not being lost to competitors by over-pricing jobs when overhead is over-applied.


Exercise Twelve – page 31

(a) Job Cost Sheets – Bentley’s Ltd

Job No. Open Balance

Materials issued

Labour charged

Overhead Finished goods

Close Balance

374 2,700 1,500 3,600 1,400 9,200

375 7,000 5,400 2,100 14,500

376 5,500 7,200 2,800 15,500

377 2,000 1,800 700 4,500

totals $2,700 $16,000 $18,000 $7,000 $39,200

(b) It is necessary to have a separate job cost sheet for each job so all of the direct costs for

materials and labour associated with each job can be collected in one place and an allocation of

overhead can be added to the cost of each job. This is important so that each job is costed fairly

and accurately with overheads being spread across all jobs on a fair basis, and the Bentley’s

costs and prices will earn a profit at the same time as keeping the firm competitive in the

market.

(c) Labour hours are used as the base to allocate overhead to jobs because overhead expenses are

mostly generated by the time it takes direct labour workers to complete jobs such as longer jobs

need more heat, light and power, use more cleaning materials and sundries, have more idle time,

require more supervisor time

(d) Invoice for Barnes

TAX INVOICE Bentley’s Ltd 359

To J Barnes GST 12-341-907

36 Rimu St, Taupo Date

Description AMOUNT

One sign frame 6,300 00

Sub total 6,300 00

Plus GST 945 00

TOTAL 7,245 00


(e)

Raw Materials

01/03 Balance 10,000 Dr



Work-in-Progress


31/03 Raw Materials 16,000 18,700 Dr

Labour 18,000 36,700 Dr





Work-in-Progress 7,000 1,000 Cr

Cost of Goods Sold 1,000 0





Cost of Goods Sold


Overhead control 1,000 11,700 Dr


Sales



(f) See (e) above

(g) The amount of overhead over-applied is $1,000 which compared to the overhead incurred of

$6,000 is quite significant. Bentley’s jobs during March cost more through the application of

overhead based on the budget rate of $7 per labour hour. While budgets cannot ever exactly

predict the future, $6 per labour hour would have exactly allocated all the overhead incurred

during March. The budgets may need revising and the rate adjusted if necessary so that jobs do

not end up being over-priced because of the added overhead cost, as over-priced products will

not be competitive in the market. Bentley’s will have made more profit as a result of the extra

overhead added to the cost of the jobs but could lose customers if its products become too

expensive.

(h) See (e) above

(i) Trading statement

Sales 22,860

Cost of goods sold 11,700

Gross profit 11,160

(j) The impact of the over-applied overhead of $1,000 on the gross profit is that it is more than

$1,000 over what it would have been less overhead had been added to the jobs in process. The

actual dollar amount is not able to be established as while the entire $1,000 was credited to cost

of goods sold for the month, actually Job 373 was completed last month, so this job was not

impacted in the current month and only Job 374 which had more overhead than it should have

had allocated was sold. The impact for this Job is that it would have cost $200 less so it would

have sold for $360 less. This would have resulted in $160 less gross profit from this job.


Exercise Thirteen – page 32

(a)

Hannah’s Creations Tax Invoice 629


Invoice to: Creative Kiwis Date: 9 September

72 Rata Street

Wanganui


Titanic Puzzles 23,280

Sub-total 23,280

GST 3,492

Total $ $26,772

(b)

Hannah's Creations Job Cost Card

Description Job No 19

Dolphin Puzzles Date Started: 7-Apr-02

Particulars Totals

Materials 5,000

Direct Labour 3,000

Overhead 1,500

Date Completed: Total cost of job 9,500

10-Apr-02 Mark-up 140% 13,300

Sold to: GST exclusive price 22,800

Creative Kids

Note this is just an example of a job cost card – any format is possible as long as key information is included

on the card – while I have added the mark-up and GST exclusive price, these are not essential but make the

invoice preparation easier.

Hannahs Creations Tax Invoice 630


Invoice to: Creative Kids Date: 21/09/2006

27 Malvern Place

Napier


Dolphin Puzzles 22,800

Sub-total 22,800

GST 3,420

Total $ $26,220


(c)

RAW MATERIALS

Sep-01 Balance 7,000 Dr

Sep-30 Accounts Payable 8,800 15,800 Dr


WORK-IN-PROGRESS

Sep-01 Balance 6,700 Dr

Sep-30 Materials 8,000 14,700 Dr

Labour 6,000 20,700 Dr


Cost of goods sold 19,200 4,500 Dr


Sep-30 Factory expenses 3,400 3,400 Dr


Cost of goods sold 400 0

COST OF GOODS SOLD

Sep-30 Finished Goods 19,200 19,200 Dr

Factory overhead 400 19,600 Dr

Income summary 19,600 0

SALES

Sep-30 Accounts Receivable 46,080 46,080 Cr

Income summary 46,080 0

(d)

General Journal

30-Sep Raw Materials 8,800

GST 1,320


(purchase of materials on account)


Raw Materials 8,000

(issue of materials to jobs)


GST 510


(overhead incurred)

Cost of goods sold 400

Overhead control 400

(under-applied overhead)


Exercise Fourteen – page 33

(a) Materials requisition answer refer to answer for Exercise 4 Wild Woodworks – answer should

be in context of Waiopehu Foundaries

(b) Time sheets answer refer to answer for Exercise 4 Wild Woodworks – answer should be in

context of Waiopehu Foundaries.

(c) Job Cost Sheets – Waiopehu Foundaries

Job Number 96 98 101 102 103 totals

1-Aug Balance 8,300 11,700 3,900 23,900

31 Materials 8,400 7,700 14,000 6,200 6,500 42,800

Labour 7,600 8,800 13,200 7,200 4,800 41,600

Overhead 950 1,100 1,650 900 600 5,200

to Finished Goods 25,250 29,300 32,750 87,300

to Balance 14,300 11,900 26,200

(d) Refer to answer for Exercise 12 Bentleys – answer in context of Waiopehu Foundaries

(e) Finished Goods Subsidiary Ledger

Job 99

Aug-01 Balance 34,300 Dr

31 Cost of Goods Sold 34,300 0

Job 96

Aug-31 Work-in-Progress 25,250 25,250 Dr

Cost of Goods Sold 25,250 0

Job 98


Job 101



(f) Waiopehu Foundaries

General Journal

31-Aug Raw Materials 41,200

GST 6,180


(purchase of materials on

account)



(issue of materials to jobs)

Overhead Control 400

Raw Materials 400

(supplies used)



(direct labour applied)


Payroll Control 800

(indirect labour)


Heat Light Power 2,100

Repairs & Maintenance 1,600


(overhead expenses transferred)



(overhead applied)



(completed production)



(cost of production sold)


GST 14,130

Sales 94,200

(sales on credit)



(under-applied overhead)


Waiopehu Foundaries ‘T’ Form format

RAW MATERIALS

Aug 1 Balance 29,500 Aug 31 Work-in-Progress 42,800

Aug 31 Accounts Payable 41,200 Overhead Control 400

Balance 27,500

$70,700 $70,700

Sept 1 Balance 27,500

WORK-IN-PROGRESS

Aug 1 Balance 23,900 Aug 31 Finished Goods 87,300

Aug 31 Materials 42,800 Balance 26,200

Labour 41,600


$113,500 $113,500



Aug 31 Wages/bank 42,400 Aug 31 Work-in-Progress 41,600

Overhead control 800

$42,400 $42,400


Aug 31 Raw Materials 400 Aug 31 Work-in-Progress 5,200

Labour 800 Cost of goods sold 700


Heat, light, power 2,100

Repairs and Maintenance 1,600

$5,900 $5,900


Aug 1 Balance 60,000 Aug 31 Cost of Goods Sold 59,550

Aug 31 Work-in-Progress 87,300 Balance 87,750

$147,300 $147,300


COST OF GOODS SOLD

Aug 31 Finished Goods 59,550 Aug 31 Income summary 60,250

Factory overhead 700

$60,250 $60,250

SALES

Aug 31 Income summary 94,200 Aug 31 Accounts Receivable 94,200

$94,200 $94,200


Waiopehu Foundaries Three Column format

Raw Materials

01/08 Balance 29,500 Dr




Work-in-Progress

01/08 Balance 23,900 Dr

31/08 Raw Materials 42,800 66,700 Dr

Labour 41,600 108,300 Dr



Payroll Control

31/08 Bank 42,400 42,400 Dr


Overhead Control 800 0


31/08 Raw Materials 400 400 Dr

Labour 800 1,200 Dr


Heat, Light, Power 2,100 4,300 Dr

Repairs and Maintenance 1,600 5,900 Dr


Cost of Goods Sold 700 0


01/08 Balance 60,000 Dr



Cost of Goods Sold


Overhead control 700 60,250 Dr


Sales




Exercise Fifteen – page 34

Job Cost Cards – Tinies Teddies

(a) Job 684

Date Materials Labour Overhead

30-Jun 500 300 200 1,000

8-Jul 1,000 1,000

14-Jul 600 400 1,000

14-Jul Completed Total cost $3,000

Job 685


20-Jul 1,200 1,200

26-Jul 900 600 1,500

(b) General Journal

12-Jul Direct Materials 2,000

GST 300


purchase of materials on credit


Direct Materials 2,200

issue of materials to production



direct labour added to production


Payroll Control 200

indirect labour transferred to overhead


Factory expenses 700

overhead expenses incurred


Factory Overhead 1,000

overhead applied to production



finished Goods transferred



Cost of Goods Sold



over-applied overhead transferred


GST 1,125

Sales 7,500

sale of job 684


(c) Tinies Teddies General Ledger

Cost of Goods Sold

31-Jul Finished Goods 3,000 3,000 Dr

Factory overhead 100 2,900 Dr

Sales

31-Jul Accounts Receivable 7,500 7,500 Cr

(d) Over-applied $100

Exercise Sixteen – page 35

(a) Job Cost Cards – Mainland Metals Job 672


30-Jun 14,000 10,000 6,000 30,000

4-Jul 1,000 1,000

9-Jul 2,000 1,200 3,200


Job 674


30-Jun 10,200 3,000 1,800 15,000

14-Jul 2,000 2,000

17-Jul 7,000 4,200 11,200


(b) and (c) Answer similar to Exercise 4 in context of Mainland Metals

(d) General Journal


GST 600


purchase of materials on credit



issue of materials to production



direct labour added to production


Payroll Control 200

indirect labour transferred to overhead


Depreciation factory 3,000

Electricity factory 1,000


overhead expenses incurred


Mainland Metals answer continued



overhead applied to production



finished Goods transferred



Cost of Goods Sold



under-applied overhead transferred


GST 13,095

Sales 87,300

sale of job 684

(e) General Ledger

Work-in-progress

1-Jul Balance 45,000 Dr

31-Jul Materials 4,500 49,500 Dr

Labour 13,000 62,500 Dr

Overhead 7,800 70,300 Dr

Finished Goods 62,400 7,900

(f) under-applied overhead $200

(g) see (d) above


Exercise Seventeen – page 36

(a) Estimated overhead / labour hours = $200000/4000 = $50 per labour hour.

Plus $25 per hour for direct labour

Combined labour charge rate is $75 per hour

(b) Raw materials control account

Raw Materials

Sep 1 Balance 9,000 Dr

Sep 30 Accounts Payable 15,000 24,000 Dr



(c) It is necessary to keep accurate time records for the factory staff so the correct amount of direct

labour and overhead (based on labour hours) can be allocated to each job as it is worked on. It

is also important to identify the idle time – ie time not specifically identified with specific jobs

being worked on so the amount can be added to the overhead costs which are then allocated to

jobs via labour hours using the predetermined overhead rate of $50 per labour hour.

(d) Job cost summary

Kiwi Engineering Job Cost Summary Sheet - September

Job No. In progress

start Materials Labour

/overhead Completed

and sold In progress

end

69 3,000 1,000 1,500 5,500

70

3,500 3,000 6,500

71 4,000 4,200 8,200

72 2,700 2,700

5,400

(e) Overhead control

Overhead control

Sep 30 Raw materials 800 800 Dr

Payroll 350 1,150 Dr

Factory expenses 6,000 7,150 Dr

Work-in-Progress 7,600 450 Cr

Cost of goods sold 450 0

(f) Invoice extract to show charges and GST

Description AMOUNT

Materials charge 3,850 00

Labour charge 3,600 00

Please pay on receipt of invoice.

Sub total 7,450 00

Plus GST 1,117 50

TOTAL 8,567 50


Exercise Eighteen – page 38

(a) Job cost card

Kitchen Plus Job Cost Card Job No:

Customer Started Completed Delivered 56

Wilson, Morningside 14/8 16/8 16/8

Date Doc.

Ref.

Materials

$

Labour

$

Overhead

$

Totals

$

14/8 R193 1,200 1,200

R194 1,600 1,600

TS 14-8 100 300 400

TS 15-8 120 360 480

TS 16-8 80 240 320

Total cost of job 4,000

(b) Invoice extract showing amounts:

Kitchen Plus Tax Invoice 56


One Kitchen unit 7,200

Sub-total 7,200

GST 1,080

Total $ $8,280

(c) The purpose of the materials requisitions used to cost Job 56 are to provide details of the actual materials

– bench top and cupboard and drawer fittings used on Job 56 and their cost so the correct materials and

costs are added to the cost of Job 56. The materials requisition also provides the stores with information

to update stores records of inventory on hand of bench tops and fittings.

(d) The purpose of the time sheets used to cost Job 56 is to show exactly how many hours each day were

spent on Job 56 so the direct labour cost can be added and the overhead which is based on the direct

labour hours can be added.

(e) Direct labour hours are used as the overhead allocation cost driver because most of the overhead is

generated by the time it takes to assemble the kitchen units – the parts are already pre-made so require

labour to fit them – hence hours worked on fitting and joining the unit is appropriate as the base for

allocating overhead as most overhead will be generated from the time spent on making the unit.


Exercise Nineteen – page 39

(a) Jo’s Toyota

Seaside Garage Tax Invoice


Invoice to: Date: Jo Car Toyota Corolla

Reg No. SG5432

Part no.

Description Qty Price Total

WOF WOF check 1 43.48 43.48

Sub-total 43.48

GST 6.52

Total $ 50.00

(b) Pete’s Mazda

Seaside Garage Tax Invoice


Invoice to: Date: Pete Car Mazda Astina

Reg No. CTU407

407 Part no.

Description Qty Price Total

DYLA

N Labour 3 70.00 210.00

WOF WOF check 1 43.48 43.48

FR Freight charge 1 10.43 10.43

PC Parts cleaner 0.3 14.30 4.29

MISC Rear brake hoses 2 39.60 79.20

FLUID Brake fluid 1 9.45 9.45

Z79X Oil filter 1 10.45 10.45

SUN Sundries 1 6.00 6.00

OIL Shell Helix Plus 3.5 13.23 46.31

MISC Igniter 1 168.50 168.50

PLUGS Spark plugs 4 8.47 33.88

Sub-total 621.99

GST 93.30

Total $ 715.29

(c) Labour is charged out at $70 an hour to cover both Bret’s or Dylan’s labour cost and the garage’s

overheads. There is a small mark-up added to parts and oil/fluids to cover the cost of administering the

ordering of parts/storage of oil/fluids but no other mark-up so the labour cost will cover the booking

administration for the cars, the cleaning and power for the garage, and all other overheads, plus provide

a mark-up to earn a profit from the job. It is important that the garage earns a profit or it will not be able

to continue in business so the labour charge has to ensure all expenses including direct and indirect

expenses will be covered, plus a profit made. However Dylan must also ensure the charge out rate is

not too high or he will lose customers to other garages that charge less for labour time.


(d) Pete has had a number of things done in one job. He has a WOF check which is $50 including GST to start with. Then he has had an oil change service, which has added costs for oil, oil filter and sundries. He has also had to have the rear brake hoses replaced to get his WOF. To fix the ignition an igniter part has had to be ordered from another city, generating a freight charge on Pete’s invoice. Parts including brake hoses, the igniter and spark plus, plus the freight charge have come to over $280 excluding GST once the garage has added its 10% mark-up to the cost of the parts to the garage. With 3 hours of labour, justified as being $70 an hour because it has to cover all the garage overheads and administration as well as the mechanics wages, another $210 excluding GST brings Pete’s bill to nearly $500 excluding GST. A few minor parts, brake fluid, and oil add to the growing cost of this service. On top of all that Pete must pay GST of over $90, which is the government’s cut from this job. It ceases to become difficult to see how Pete is then faced with a bill of over $700.

(e) Cost to garage and profit made on the job

Item Part Number Quantity

GST

exclusive

cost per 1

item to the

garage Total cost

Labour DYLAN 3 45.00 135.00

WOF check WOF 1 28.00 28.00

Freight charge FR 1 8.00 8.00

Parts cleaner PC 0.3 13.00 3.90

Rear brake hoses MISC 2 36.00 72.00

Brake fluid FLUID 1 9.00 9.00

Oil filter Z79X 1 9.50 9.50

Sundries SUN 1 3.00 3.00

Shell Helix Plus OIL 3.5 12.60 44.10

Igniter MISC 1 153.00 153.00

Spark plugs PLUGS 4 7.70 30.80

Total cost of job 496.30

Sold exc GST 621.99

Profit 125.69

Exercise Twenty – page 40

(a) Show the Raw Materials account in the General Ledger for June.

Palms Pottery General Ledger

Raw Materials

Jun 1 Balance 6,000 Dr

Jun 30 Accounts Payable 8,000 14,000 Dr

Work in progress 7,500 6,500 Dr

(b) overhead rate $7.00 per wheel and kiln hour

(c) Explain why wheel and kiln hours are used as the cost driver for overhead.

The overhead costs are mostly related to the use of the wheel and kiln such as

electricity and maintenance so wheel and kiln hours are the best cost driver for

overhead


(d) Complete the ledger account for job 71-bowls in the Work-in-Progress Subsidiary Ledger.

(e) Job cost card for Job 72

(f) Show the general journal entries needed to record the sale of job 72-garden eyes to M Watson on credit,

on 27 June.


Finished goods 11,400

M Watson 26,220

Sales 22,800

GST 3,420

(g) Show the general journal entry to transfer the under or over applied overhead for June to cost of goods

sold.

Factory overhead control 300


(h) Explain why under or over applied overhead occurs in job cost systems.

Overhead is applied to jobs during the year based on estimates of overhead and

the cost driver at the beginning of the year. Actual results will always be different

from the budget estimates

(i) Tammy needs to ensure under or over applied overhead is minimised so that her pottery garden

ornaments are sold at a price which covers all her direct costs such as clay and glaze, labour time and all

her indirect costs such as power to run the pottery wheel and kiln, and maintenance of her tools and

equipment. This means she needs to apply overhead to each job and use a budget rate that should apply

nearly the entire overhead actually incurred to the jobs. This way the price she charges for them will

cover all her costs and she will make a profit to keep the business viable. She needs to minimise under

applied overhead so she does not make a loss or less profit than she needs to stay viable. She needs to

minimise over applied overhead so she does not price her garden ornaments to high and lose sales to

competitors.

Palms Pottery Work-in-Progress Subsidiary Ledger

Job 71 Bowls

Jun 1 Balance 5,400 Dr

Jun 30 Raw Materials 1,000 6,400 Dr

Labour 2,000 8,400 Dr

Overhead 700 9,100 Dr

Finished Goods 9,100 0

Job No: 72 Product: Garden Eyes

Materials Labour Overhead Total

4,000 6,000 1,400 11,400