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
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.




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

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