Question

LJE Ltd undertakes jobs for its clients who are billed when the jobs are completed.

	Job 101	Job 102	Job 103
Started	May 2019	June 2019	July 2019
Completed	June 2019	June 2019	August 2019
Cost information:
	As at 31 May 2019		As at 31 July 2019
	K’000		K’000
Direct material	10.0		8.0
Direct labour (960 hrs @ K50	48.0
Direct labour 1040 @ K50)			52.0
Production overhead	See below	See below	See below

Additional information about the three jobs are as follows:

1. Direct material is introduced into jobs at the start of the jobs. Thus, material for Job 101 was introduced in May 2019, for jobs 102 and 103 direct material was introduced in June 2019
2. Material are bought in the month in which they are required and issued to jobs directly. Materials purchased in June 2019 cost K23,000. (See table above for more insights about jobs 102 and 103).
3. Direct labour at 31 May 2019 and 30 June 2019 was just half of the total labour cost in the respective jobs
4. The labour cost incurred in June was K160,000 (Note the direct labour for May and July 2019 for jobs 101 and 103)
5. Overhead is absorbed into jobs on the basis of direct labour cost at the rate ofK0.5 per Kwacha in all the months
6. Jobs 101 (cost K154,000) and Job 102 were completed in June 2019. The cost of these completed jobs constituted cost of goods sold in June 2019 for LJE Ltd. Job 103 was still in progress at the end of July 2019.
7. The overheads incurred in June 2019 were K95,000

Required

For Job 101 calculate:

1. The direct labour cost incurred in June 2019 and the total direct labour cost on the whole job.

                                                                                                                                 

2. The overhead cost absorbed into the job on its completion in June 2019

                                                                                                                                   

For Job 102 calculate:

1. The direct material cost

2. The direct labour cost

                                                                                                                          

3. The overhead absorbed into the job

For job 103 Calculate the overhead cost absorbed into the job in July 2019 and the cost of work in progress as at 31July 2019

Answer 1