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Midterm Exam- Summer 2007 Managerial Accounting COMM 305 & ACCO 240 (25 marks) Question 3 SNC produces fire trucks. The company uses a normal job-order costing system to compute its cost of goods manufactured. The company's policy is to price its job at cost plus 20% markup. On January 1, 2006 there was only one job in process with the following costs: Job 315 Direct materials $ 3,125 Direct labour $15,000 Applied overhead $14,250 Total $32,375 The following balances were taken from the general ledger of the company as of January 1, 2006: Direct materials inventory $30,000 Finished goods inventory (for Job 314) $55,000 During the year 2006, the following events occurred: Direct materials were purchased on account for $250,000 Two more jobs were started: Job 316 and Job 317. Direct materials and direct labour costs incurred by each job in process during the year 2006 are as follows: Job 315 Job 316 Job 317 Direct materials $150,000 $30,000 $10,000 Direct labour $150,000 $35,000 $15,000 The company incurred the following actual factory overhead during the year: Factory rent $90,000 Factory supplies $43,000 Indirect labour $60,000 Jobs 315 and 316 were completed. Jobs 314 and 315 were sold. Required: 1. If the factory overhead costs are applied to each job on the basis of direct labour dollars, what is the total applied overhead for the year 2006? (3 marks) 2. Prepare simple job-order cost sheets for jobs 315, 316 and 317 for the year ended December 31, 2006. (8 marks) 3. Is overhead over-applied or under-applied? By how much? (3 marks) 4. Prepare a schedule of Cost of Goods Sold, identifying both normal and adjusted cost of goods sold, for the year ended December 31, 2006. (7 marks) 5. Compute the selling price of Job 315. (2 marks) 6. Compute the ending balances as of December 31, 2006 for the following accounts: direct materials and work-in-process (2 marks) 6

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