Citra Tailors provides services of making bajukurung at Bandar Cahaya. It uses a job order costing system. The overhead absorbed is based on direct...

Citra Tailors provides services of making bajukurung at Bandar Cahaya. It uses a job order costing system. The overhead absorbed is based on direct labour hour. The budgeted manufacturing overhead for the year 2018 is RM69,000. Management expects a total of 13,800 direct labour hours will be used.

a)     Discuss why companies use budgeted overhead costs rather than actual costs to compute predetermined overhead rate.

b)    Calculate the predetermined overhead rate for Citra Tailors for the month of April 2018.

c)     Prepare journal entries to record the following transactions incurred during the month of April 2018:

            i)          Purchase direct material AA from Syarikat Jaya on credit at RM5,885.

          ii)          200 metres of direct material AA was requested from the store. It was bought for RM0.50 per metres.

        iii)          The alteration section has requested for 180 metres of material BB which are the indirect materials. The cost of the purchase was RM0.30 per metre.

         iv)          Direct labour cost incurred for the month of April amounted to RM40,000.

          v)          Car insurance cost for the month of April is RM720. The car is used for delivery purposes.

         vi)          The indirect labour cost incurred for the current month is RM18,000.

       vii)          Depreciation of sewing machines for the month of April is RM5,000.