Q1. The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio. The company is considering introducing an activity-based costing system. Given below are each activity, its cost and its related activity driver.
|
Activity
|
Cost
|
Activity driver
|
|
Material Setup
|
300,000
|
No of setup
|
|
Material handling
|
250,000
|
No of Parts
|
|
Cutting
|
700,000
|
No of Parts
|
|
Assembly
|
600,000
|
DLH
|
|
Finishing
|
450,000
|
No of units
|
The level of activity for the year is:
|
|
Lounge
|
Patio
|
|
Units to Be produced
|
10000
|
5000
|
|
No of Setups
|
60
|
60
|
|
No of Parts per unit
|
10
|
5
|
|
DLH per unit
|
5
|
2
|
Under an activity-based costing system, what is the total cost of lounge chairs for the year? ( Kindly show the workings)
Q2. The following information relates to Wells Fargo for July 2008:
|
Actual Direct Labor costs
|
80,000
|
|
Actual direct labor rate per hour
|
8
|
|
Factory Overhead rate per direct labor hour
|
12
|
|
Factory Overhead incurred
|
160,000
|
Assuming underapplied or overapplied overhead is transferred to cost of goods sold at the end of the period, what would be the entry to the cost of goods sold account? (Show all the workings).