Shoostar Ltd is a video tech company that produces videos for companies’ marketing campaigns and video training content. All jobs are tailor-made to the clients’ requirements. The company uses a job costing system, and had 2 jobs in process at the start of the year: Job S1 ($66 000) and Job S3 ($55 000). The following information is available:
(i) The company applies manufacturing overhead on the basis of video production hours. Budgeted overhead and video production activity for the year were anticipated to be $800 000 and 40 000 hours, respectively.
(ii) The company worked on four jobs during the first quarter (i.e. from 1 July to 30 September). Direct materials used, direct labour incurred and video production hours were as shown in the following table:
Job numbers Direct material Direct labour Video production hours
S1 $ - $40 000 500
S2 50 500 23 000 1000
S3 - 65 000 1 500
S4 30 000 $40 000 2 000
(iii) Manufacturing overhead incurred during the first quarter was $385 000.
(iv) Shoostar Ltd completed Job S1, and Job S3 during the first quarter. Job S1 was sold on credit, producing a profit of $60 000 for the company.