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Hi John,
Please help with this once again impossible Kaplan question I wish ACCA would just use BPP The questions are far clearer and well put 🙂An advertising agency uses job costing and recovers overheads on chargeable hours. Jobs for thee accounts were worked on in Month 4 as follows:
Job 1 Job 2 Job 3
Opening WIP 7000 9000 6000
Direct materials etc 1750 0 2400
Chargeable hours 13000 2600 9400Both budgeted and actual overheads were $70000.
Jobs 1 and 3 were incomplete at the end of the month 4. What was the value of WIP at the end of month 4?The question says that the overhead will be recoverd on chargeable hours basis. So first what we have to do is to allocate the total overhead to each job individually on the chargeable hours basis.
Total Chargeable hours are (13000+2600+9400)=25000
overhead recovered for Job 1 = 13000/25000 * 70000= $36400
Job 2= 2600/25000 * 70000= $7280
job 3= 9400/25000 * 70000= $26320Now it says that job 1 and job 3 are still incomplete at the end of the month so that means all the cost associated with these two jobs will be your closing work in progress. So you simply add them up along with the overhead cost of each job
(Job 1 = $7000+1750+36400) + (Job 3= $6000 + $2400+ $9400) = $62950
Hi
This is my calculation as well
Only I think you meant +26320 instead of 9400
(Job 1 = $7000+1750+36400) + (Job 3= $6000 + $2400+ $9400) = $62950(Job 1 = $7000+1750+36400) + (Job 3= $6000 + $2400+ $26320) = $79870
The multiple choice options are
A $80 000
B $84 350
C $86 650
D $90 000Yea sorry for that and i do not understand than how can one of these answers be the right one than. I am pretty sure thats how you solve this.
The question has a typo … chargeable hours for Job 2 are 12,600 and not 2600.
You need to work out the overheads value per job.
So,
13000 + 12600 + 9400 = 35,000
OAR = 70000/35000 = $2 which works out as 2:1 or $2 per $1 of labour
Job 1 overheads are $26000, Job 3 overheads are $18800.
Total of Job 1 and 3 now equal $84,350 (Option B)
So the 13000 is actually $13000 and not 13000 hours.
And job 2’s chargeable hours are $12600 because of typo $2600.
In summary:An advertising agency uses job costing and recovers overheads on chargeable hours. Jobs for thee accounts were worked on in Month 4 as follows:
Job 1 Job 2 Job 3
Opening WIP 7000 9000 6000
Direct materials etc 1750 0 2400
Chargeable hours 13000 12600 9400Both budgeted and actual overheads were $70000.
Jobs 1 and 3 were incomplete at the end of the month 4. What was the value of WIP at the end of month 4?Total Chargeable hours are (13000+12600+9400)= 35,000
overhead recovered for Job 1 = 13000/35000 * 70000= $26,000 or 13000 x $2
Job 2= 12600/35000 * 70000= $25,200 or 12600 x 2
job 3= 9400/35000 * 70000= $18,800 or 9400 x 2Job 1: 7000 + 1750 + 26000 +13000 = 47,750
Job 3: 6000 + 2400 + 18800 + 9400 = 36,600
Total 84350 (Option B)Haze and oruchei you two are geniuses Thanks!! God bless
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