Singa Handicrafts Ltd manufactures antique furniture. The company uses a job costing system and manufacturing overhead is applied on the basis of direct labour hours. In the budget for the current year, the following budgeted costs were included: Manufacturing overhead $420,000 Direct labour cost $240,000 Budgeted direct labour rate $30 per hour On 1 August, the company had the following balances: Work in process inventory Job number 83 $42,000 Job number 84 $26,750 Raw materials inventory Direct materials $7,500 Indirect materials $3,500 Finished goods inventory $0 During the month, the following occurred: (i) The company worked on four jobs. The costs incurred and direct labour hours consumed were as shown below: Job Number Direct material Direct labour Direct labour hours 83 10,500 17,500 600 84 0 11,000 350 ACC203e Assignment 2 SIM UNIVERSITY Assignment 2 – Page 3 of 5 85 ? 32,500 1,000 86 7,500 4,400 250 (ii) Overhead for the month were as follow: Indirect materials (all were used in production) ? Depreciation - plant & machineries $17,000 Depreciation - delivery vans $2,500 Salaries - production $30,000 Salaries - sales & administration $25,000 Other factory costs $69,750 Other selling and administration costs $40,000 (iii) Raw material purchased on credit Direct material $37,500 Indirect material $27,500 (iv) Spoilage & reworked costs Job Number 83 Normal spoilage amounting to $190 and abnormal spoilage of $50 were incurred. Job Number 84 Normal spoilage with estimated disposal selling price of $200 was incurred. Job Number 85 Rework cost of $140 was incurred. (v) The company completed job number 83 and job number 84. Job number 84 was sold on credit at the selling price that will enable the company to earn a gross profit margin of 50%. (vi) On 31 August, the company had the following balances: Work in process: Job number 85 ? Job number 86 ? Raw materials inventory Direct materials $5,000 Indirect materials $6,000 Finished goods inventory ? Required: (a) Determine the company's predetermined overhead rate. (b) Compute and show the following: (i) The cost of direct material issued to the job number 85. ACC203e Assignment 2 SIM UNIVERSITY Assignment 2 – Page 4 of 5 (ii) The cost of indirect material to be included in the manufacturing overhead. (c) Illustrate the journal entries to record the following: (i) Issue of direct material to production and the direct labour incurred. (ii) Manufacturing overhead incurred during the month. (iii) Application of overhead to production. (iv) The costs of spoilage, rework and scrap. (v) Completion of job numbers 83 and job number 84. (vi) The sale of job number 84. (d) Determine the cost of the jobs that were still in production as at 31 August. (e) Calculate the cost of the finished goods inventory as at 31 August. (45 marks) Question 2 In the classic market exchange, traders own the resources and bear the full wealth effects of their actions. Under such circumstances, there is no agency problems as the market performs the three tasks (partition decision rights, measure performance and reward performance) automatically. However in an organization, this is not the case. Deliberate effort must be made to design an effective organisational architecture that will ensure decision rights are partitioned optimally and decision makers motivated to maximise firm value. Required: Select a company you are familiar with or one you are currently working in, or one with information publicly available. Using your own words as much as possible, and in not more than 2,000 words (in total): (a) Describe the industry the chosen company is operating in, and an outline of the background, nature of business, the industry and the environment it is operating in, its products/services, etc. (5 marks) (b) Analyse the company’s organization structure and describe what has been put in place by the company to replicate the three administrative devices to minimize agency problems. (10 marks) (c) Describe any weaknesses of these existing systems. (10 marks) (d) Suggest possible improvements that the company can adopt. (15 marks) Question 3 Costs can be classified as fixed and variable. (a) Define the terms: fixed costs and variable costs. (2 marks) (b) In the context of the company that you have just selected, provide three (3) examples of each. (8 marks) (c) Explain the advantages of classifying costs as fixed and variable.