Indirect CostsDirect CostsAssembly DepartmentManufacturing OverheadDirect Manuf.Labor CostBudgeted manufacturing overhead divided by the budgeted quantity of the allocation base:Machining Department overhead:$1,500,00030,000= $50 per machine-hourAssembly Department overhead:$5,100,000$3,000,000= 170% of direct manuf. labor costs2.Machining department overhead allocated, 2,800 hours $50$140,000Assembly department overhead allocated, 170% $19,00032,300Total manufacturing overhead allocated to Job 494$172,3003.Machining Dept.Assembly Dept.Actual manufacturing overhead$1,800,000$ 5,300,000Manufacturing overhead allocated,$50 33,000 machine-hours1,650,000— 170% $3,200,000— 5,440,000Underallocated (Overallocated)$ 150,000$ (140,000)9
4-28Accounting for manufacturing overhead. Creative Woodworking uses normal costing andallocates manufacturing overhead to jobs based on a budgeted labor-hour rate and actual direct labor-hours. Under or overallocated overhead, if immaterial, is written off to Cost of Goods Sold. During2017, Creative recorded the following:Required:1.Compute the budgeted manufacturing overhead rate.2.Prepare the summary journal entry to record the allocation of manufacturing overhead.3.Compute the amount of under or overallocated manufacturing overhead. Is the amountsignificant enough to warrant proration of overhead costs, or should Creative Woodworkingwrite it off to cost of goods sold? Prepare the journal entry to dispose of the under- oroverallocated overhead.10
4-29Job costing, journal entries. The University of Chicago Press is wholly owned by theuniversity. It performs the bulk of its work for other university departments, which pay as thoughthe press were an outside business enterprise. The press also publishes and maintains a stock ofbooks for general sale. The press uses normal costing to cost each job. Its job-costing system hastwo direct-cost categories (direct materials and direct manufacturing labor) and one indirect-costpool (manufacturing overhead, allocated on the basis of direct manufacturing labor costs).The following data (in thousands) pertain to 2017:Required:1.Prepare an overview diagram of the job-costing system at the University of Chicago Press.2.Prepare journal entries to summarize the 2017 transactions. As your final entry, dispose of theyear-end under- or overallocated manufacturing overhead as a write-off to Cost of GoodsSold. Number your entries. Explanations for each entry may be omitted.