Question

Toys World started and finished job number A26, a batch of 1,000 cuddly koalas, during March 2020. The job required $4,850 of direct material and 32 hours of direct labour at $20 per hour. The predetermined overhead rate is $10.50 per direct labour hour. On 31st March, 900 of the cuddly koalas were shipped to a local toy shop. Required: a) Prepare journal entries to record the incurrence of production costs, completion of job number A26 and the shipment of 900 cuddly koalas to local toy shop. b) Calculate the cost per cuddly koala for job number A26. c) How might the managers at Toys World use this information?

Answer 1

Journal Entries
Date	Particulars	Debit Amount ($)	Credit Amount ($)
	Work In Progress Inventory	5826
	To Raw Material Inventory		4850
	To Factory Payroll (32*20)		640
	To Manufacturing Overhead (32*10.50)		336
	( Recording of WIP for Job number A 26)
	Finished Goods Inventory	5826
	Work in Progress Inventory		5826
	(on completion of Job number A 26)
	Cost of Goods Sold	5,243.40
	Finished Goods Inventory		5,243.40
	(5826/1000*900)
	(Sale of Goods)
	Cost of 1000 units
	Raw Material	4850
	Direct Labour	640
	Manufacturing Overhead	336
	Total Cost	5826
	Cost per unit	5.826

The managers may use this cost to compare it with the actual cost and to compute variance as well as profit on sale.