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group assignment - Spring 2008 - answer key

group assignment - Spring 2008 - answer key - ACC 359...

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ACC 359 Chapter 4 Group Work - Answer Key 1/31/2008 1 If you use the actual costing rate, manufacturing overhead applied will equal manufacturing overhead incurred. actual OH costs equals 250 equals $2.50 per labor dollar actual DL costs 100 2 A judge would choose the method in Chapter 4 that is the most accurate (regardless of how hard the information is to attain or how much time it might take). The most accurate method is the Adjusted Allocation-Rate approach (aka re-do everything using actual costing). Therefore, the judge would use the manufacturing overhead rate above, $2.50. CIP FG COGS Direct Materials 425 25 250 Direct Labor 45 5 50 Manuf. OH 112.5 12.5 125 582.5 42.5 425 under/over-applied OH 0 0 0 582.5 42.5 425 McDonnell's COGS goes from $450 to $425. Therefore the Air Force's bill goes from $337.5M + fixed fee to $318.75M + fixed fee. The journal entry for the judge's decision would be: CIP inventory 22.5 FG inventory 2.5 COGS 25 3 The contracting officer for the Air Force wants the under/over-applied overhead allocated using the approach that creates the smallest bill for the Air Force.
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