Kirpalani Stores manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour-intensive production process, so it assigns manufacturing overhead based on direct labour cost. Kirpalani expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2019. At the end of December 2018, Kirpalani reported work in process inventory (Job 551) of $93,000 The following events occurred during January 2019. i) Purchased materials on account, $392,000. ii) Incurred manufacturing wages of $400,000 iii) Requisitioned direct materials and used direct labour in manufacturing. Direct materials Direct labour Job 551 $70,200 $61,200 Job 552 97,500 115,600 Job 553 105,300 78,200 Job 554 117,000 85,000 iv) Issued indirect materials to production, $30,000. v) Charged indirect manufacturing wages to production, $60,000. vi) Depreciation of production machinery, $85,000 vii) Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000. viii)Allocated overheads to jobs at the predetermined rate ix) Units completed: 551, 552 & 554. x) Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales) Required: (a) Compute Kirpalani’s predetermined manufacturing overhead rate for 2019.
Kirpalani Stores manufactures customized household furnishings. The company uses a perpetual inventory
system and has a highly labour-intensive production process, so it assigns manufacturing overhead based
on direct labour cost. Kirpalani expects to incur $2,205,000 of
direct labour costs of $3,150,000 during 2019.
At the end of December 2018, Kirpalani reported work in process inventory (Job 551) of $93,000
The following events occurred during January 2019.
i) Purchased materials on account, $392,000.
ii) Incurred manufacturing wages of $400,000
iii) Requisitioned direct materials and used direct labour in manufacturing.
| Direct materials | Direct labour | |
| Job 551 | $70,200 | $61,200 |
| Job 552 | 97,500 | 115,600 |
| Job 553 | 105,300 | 78,200 |
| Job 554 | 117,000 | 85,000 |
iv) Issued indirect materials to production, $30,000.
v) Charged indirect manufacturing wages to production, $60,000.
vi)
vii) Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000.
viii)Allocated
ix) Units completed: 551, 552 & 554.
x) Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales)
Required:
(a) Compute Kirpalani’s predetermined manufacturing overhead rate for 2019.
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