Hellas Pty. Ltd had the following balances on the 1st of July 2013:
Materials Control (direct and indirect materials) 5000
Work in Process 10 000
Finished Goods 6000
Hellas Pty. Ltd. uses a Factory Ledger and during July the following transactions took place:
Materials purchased: Direct materials - $18 000
Indirect materials - $ 3 000 21 000
Materials issued during the month:
Direct Material 21 000
Indirect Material 2 600
Total payroll for the period was paid in cash and amounted to $54 000. This was distributed as follows:
Assembly workers 42 000
Supervisor's salary 8 000
Factory cleaner 4 000
Other overhead incurred during the month was as follows:
Depreciation on machinery 8 000
Factory light and power 2 500
Other overhead incurred 1 500
Other information:
Overhead is applied to production at 70% of the Direct Labour cost. The balance in the WIP account at the end of July was $13 000.
During July goods costing $90 000 were sold. Goods are marked up at 80% on cost.
Required:
Closing balance of Materials Control Account $__________________
Closing balance of Finished Goods Account $__________________
The total actual overhead incurred $__________________
Calculate the amount of under applied or over applied overhead. How should this Amount be accounted for? Provide specific reasons for your proposals.
Show all relevant calculations and T accounts
Question 4
The following information relates to the Mick Richards Company.
Beginning fixed manufacturing overhead in inventory $60,000
Ending fixed manufacturing overhead in inventory $45,000
Beginning variable manufacturing overhead in inventory $30,000
Ending variable manufacturing overhead in inventory $14,250
Fixed selling and administrative costs $724,000
Units produced 5,000
Units sold 4,800
Required:
What is the difference between operating profits under absorption costing and Variable costing?