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# topic 5 - 1 2 SOLUTION TO 439 Allocation and proration of...

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SOLUTION TO 4-39 Allocation and proration of manufacturing overhead. 1. \$252,000 \$420,000 = \$0.60 per direct manufacturing labour dollar The Work-in-Process inventory breakdown at the end of 2007 for Jobs 1768B and 1819C is: Job 1768B Job 1819C Total Direct materials (given) Direct manufacturing labour (given) Manufacturing overhead allocated, 60% × DL\$ Total manufacturing costs \$22,000 11,000 6,600 \$39,600 \$ 42,000 39,000 23,400 \$104,400 \$ 64,000 50,000 30,000 \$144,000 The finished goods inventory at the end of 2007 is \$156,000 (given). A direct manufacturing labour cost of \$40,000 implies a budgeted manufacturing overhead costs component of \$24,000. The COGS is \$1,600,000 (given). The total direct manufacturing labour of \$400,000 implies direct manufacturing labour in COGS of \$310,000 (\$400,000 – \$11,000 – \$39,000 – \$40,000). Hence, manufacturing overhead allocated in COGS is 60% × \$310,000 = \$186,000. Direct materials in COGS is \$1,104,000 (\$1,600,000 – \$310,000 – \$186,000). The summary account information is as follows: Direct Materials Direct Manufacturing Labour Manufacturing Overhead Allocated Total Work in process Finished goods Cost of goods sold Total \$ 64,000 92,000 1,104,000 \$1,260,000 \$ 50,000 40,000 310,000 \$400,000 \$ 30,000 24,000 186,000 \$240,000 \$ 144,000 156,000 1,600,000 \$1,900,000 2. = = \$240,000 – \$186,840 = \$53,160 3

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3a. Account Account Balance (Before Proration) (1) Proration of \$53,160 Overallocated Manuf. Overhead (2) End-of-Year Balance (After Proration) (3)=(1)+(2) Work in process Finished goods Cost of goods sold Total \$ 144,000 (144/1,900 = 7.58%) 156,000 (156/1,900 = 8.21%) 1,600,000
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topic 5 - 1 2 SOLUTION TO 439 Allocation and proration of...

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