Voltus Communications, a manufacturer of communications equipment, uses a job costing system. Manufacturing overhead is applied based on machine hours and it uses a predetermined overhead rate with budgeted overhead of $3,600,000 for the year and 80,000 machine hours.
Voltus uses a financial year of 1 July 2018 to 30 June 2019 and all the activities for the year have been carried out. Summarised details for period 1 July 2018 to 31 May 2019 and for June 2019 follow. Jobs B12- 008,K12-009 and K12-011 were completed during June 2019 .All completed jobs except K12-009 have been sold by 30 June 2019.
| Jobs in process at 31 May 2019 | |
| Job numbers | Balance at 31 May 2019 |
| B12-008 | $263,000 |
| K12-009 | 163,000 |
| K12-011 | 0 |
| L15-005 | 0 |
| L15-006 | 0 |
| Total | 426,000 |
| Work carried out during June 2019 | |||
| Job numbers | Direct material | Direct labour | Machine hours |
| B12-008 | $2,500 | 13,500 | 300 |
| K12-009 | 14,000 | 36,000 | 1,000 |
| K12-011 | 71,800 | 85,100 | 1,400 |
| L15-005 | 118,700 | 55,000 | 2,500 |
| L15-006 | 78,000 | 50,400 | 800 |
| Totals | $285,000 | $240,000 | 6,000 |
| Actual Manufacturing Overhead incurred | 1July 2018 -31 May 2019 | During June 2019 |
| Indirect material | $375,000 | $27,000 |
| Indirect labour | 1,035,000 | 90,000 |
| Utilities | 735,000 | 66,000 |
| Depreciation | 1,155,000 | 105,000 |
| Total overhead | $3,300,000 | 288,000 |
| Other information | ||
| 1 July 2018 – 31 May 2019 | During June 2019 | |
| Raw Material purchases * | $2,895,000 | $294,000 |
| Direct labour cost | 2,535,000 | 240,000 |
| Machine hours | 73,000 | 6,000 |
| Account balances 1 July | |
| Raw Material Inventory | $315,000 |
| Work in Process Inventory | 180,000 |
| Finished Goods Inventory | 375,000 |
| Account balance 30 June 2019 Raw Material Inventory | $255,000 |
*Raw material purchases and raw material inventory consist of both direct and indirect materials
Required:
- Calculate the amount of manufacturing overhead Voltus would have applied to jobs for the period 1 July 2018 to 31 May 2019.
- Calculate the amount of manufacturing overhead Voltus would have applied to jobs during June 2019.
- Determine the amount by which manufacturing overhead is overapplied or underapplied at 30 June 2019.
- Determine the balance in the finished goods account at 30 June 2019.
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