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|
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.
- Calculate the company’s predetermined overhead rate.
- Calculate manufacturing overhead applied to production for the first quarter.
- Determine the cost of jobs completed in the first quarter.
- Determine the cost of the jobs still in process at the end of the first quarter.
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