Depreciation (Straight line method) $6,400

Property taxes 1,500

Plant Electricity 4,100

Advertising 1,500

Plant Insurance 1,000

Selling expenses 1,000

Material handling 1,500

The firm’s job-order costing system uses direct labour hours as the cost driver for overhead application. The firm uses normal costing. In December of the preceding year, in budgeting for the current year, Ted estimated that the normal annual usage is 120,000 direct labour hours and predicted $606,000 in overhead costs. During October the firm completed Job 949 and Job 950. Job 948 and Job 950 were sold on account, producing a 10% markup.


1. Calculate: a. Total Actual Overhead b. Calculate the Actual OH Rate based on direct labour hours c. Determine the OH amount allocated to each job.

2. Identify the jobs that represent the closing balances of WIP, FG and COGS.

3. Using Job Cost Sheets: a. Recognise costs of jobs in opening inventory balances b. For each job worked this month, calculate DM used, DL used, OH Applied and the total cost of Jobs at end of the month.

4. Make the Schedule of Cost of Goods Sold for the month.

5. Calculate the amount of under- or over- applied OH (OH variance).

6. Dispose of the OH variance using: a. Direct write-off method (to COGS) b. Proration method.

7. Supposed that this company uses direct write-off method to dispose of the OH variance. Make the Profit and Loss Statement for the month (to the Gross Margin only).