PART 1 (25 marks)

Kirpalani Stores manufactures customized household furnishings. The company

uses a perpetual inventory system and has a highly labour-intensive production

process, so it assigns manufacturing overhead based on direct labour cost Kirpalani

expects to incur $2,205,000 of manufacturing overhead costs and estimated direct

labour costs of $3,150,000 during 2019.

At the end of December 2018, Kirpalani reported work in process inventory (Job 551)

of $93,000

The following events occurred during January 2019.

i) Purchased materials on account $392,000.

ii) Incurred manufacturing wages of $400,000

iii) Requisitioned direct materials and used direct labour in manufacturing.

Job 551

Job 552

Job 553

Job 554

Direct

Materials

$70,200

97,500

105,300

117,000

Direct

Labour

$61,200

115,600

78,200

85,000

iv) Issued indirect materials to production, $30,000.

v) Charged indirect manufacturing wages to production, $60,000.

vi) Depreciation of production machinery, $85,000

(c)

(d)

vii) Other manufacturing overhead costs incurred on units 551 to 554 amounted to

$49,000.

viii) Allocated overheads to jobs at the predetermined rate

ix) Units completed: 551, 552 & 554.

x) Sold units 551 & 554 (billed customers at a margin of 33/3% on sales)

Required:

Compute Kirpalani s predetermined manufacturing overhead

rate for 2019.

(a)

(b) Calculate the total manufacturing costs for each job.

Using the total figures, record the above transactions in the

general journal.

(1½

marks)

(4¹

marks)

(9%

marks)

Post the manufacturing overhead transactions to the Manufacturing Overhead T-

account, clearly showing the balance before closing the account. State the

journal entries necessary to dispose of the variance. Assume that the

manufacturing overhead variance is immaterial. (3 marks)

(e) What is the balance in the Cost of Goods Sold account after the adjustment? (2

marks)

(f) Compute Kirpalani's gross profit earned on the jobs, after adjusting for the

manufacturing overhead

variance

(2 marks)

(g) Post the appropriate entries to Work in Process Inventory Control

account & determine the account

balance on January 31.

(2¹ marks)

"Don't wait for your boat of success to come in; row out to

meet it" Uriel Salmon

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