What is the difference between operating profits under


Question 1:

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:

  1. Closing balance of Materials Control Account $__________________
  2. Closing balance of Finished Goods Account $__________________
  3. The total actual overhead incurred $__________________
  4. 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 2

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?

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Financial Accounting: What is the difference between operating profits under
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