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M/s. Perfect Printers Ltd. operates a printing press. During November 2019, the plant was operating at full capacity. The material and labor costs of Job 101 and all other jobs worked on, in November, are shown in the image.
In addition to the foregoing costs, factory overhead incurred in November amounted to $44,000. Overhead is allocated to production on the basis of direct labor costs.
Required:
You are required to:
Question (i). Show what factory Profit or Loss on Job 101 would be, using two different methods of accounting for overtime premium. Assume that the contract price for this job is $40,000.
Question (ii). Indicate under what circumstances each method should be used.
Question (iii). State whether the profit or loss of the company during November would be affected by the choice of one method or another.
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