# 6-12 - portion of LLA Allocation rate = 1 1(DM DL 1(3500...

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Problem 6-12 Product A Product B Units 1200 4800 DM 6500 3500 DL 3000 9000 MOH 45000 LLA: OV = a+b*(y) OV = 20,000 + 1(DM+DL) Normal Volume of DM\$ and DL\$: \$20,000 NORMAL FULL COSTING: Allocation Rate = a/(normal volume) + b = (\$20000)/(20000 normal \$DL and \$DM) + 1 = 2 Product A Product B OV (6500+3000)2 = 19000 (3500+9000)2 = 25000 Product A Product B DM 6500 3500 DL 3000 9000 OV 19000 25000 TOTAL 28500 37500 Unit Cost 23.75 7.81 Allocate Actual Plug? 44000 45000 1000 One half of everything was sold: Product A Product B Inventory 14250 18750 =33000 CGS 14250 18750 +1000 plug =34000 *We find the plug to COGS by calculating the difference between the actual overhead and the allocated overhead. Check: Total cost in cost pools = 67000 Inv + CGS = 33000 + 34000 = 67000 NORMAL VARIABLE COSTING Recall our LLA is OV = 20000 + 1(DM+DL). Allocation Rate is ONLY the variable

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Unformatted text preview: portion of LLA. Allocation rate = 1 1(DM+ DL) 1(3500+9000) 1(6500 + 3000) Product A Product B DM 6500 3500 DL 3000 9000 OV 9500 12500 =22000 TOTAL 19000 25000 One half of everything was sold. Figure out how much the plug will be first: Only variable overhead is allocated, so you must take the 20000 fixed overhead cost (the intercept in the LLA) out of the actual amount before calculating the plug. Allocate Actual Plug? 22000 45000-20000 3000 Inventory 9500 12500 = 22000 CGS 9500 12500 + 3000 = 25000 The intercept of the LLA (\$20,000) would be accounted for as a period cost on the income statement. Check: Total Cost Pools = 67000 Inv + CGS + Period = 25000+22000+20000 = 67000...
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