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QUESTION TWO (20 marks, 32 minutes) Precision Manufacturing uses a normal costing system....

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Accounting

QUESTION TWO (20 marks, 32 minutes)
Precision Manufacturing uses a normal costing system. The following data are for 2007:
Machine-hours data and the ending balances (before the disposition of the manufacturing
overhead variance) are as follows:
Required:
Assume the year end variance in manufacturing overhead is material. Prepare the
journal entry to dispose the variance. Show all your calculations. (6 marks)
Provide a detailed explanation of what caused the variance. (6 marks)
The company produces a product that requires $50 of materials (of which $2 is
classified as indirect materials), $20 of direct labour and 2 machine hours.
Calculate the unit cost of the product assuming the company uses an actual
costing system. (4 marks)
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