D manufacturing overhead allocated 93000

This preview shows page 37 - 41 out of 41 pages.

(d) Manufacturing Overhead Allocated 93,000 Manufacturing Department Overhead Control 87,000 Cost of Goods Sold 6,000 To close manufacturing overhead accounts and overallocated overhead to cost of goods sold
Image of page 37

Subscribe to view the full document.

4-38 An overview of the product-costing system is COST OBJECT: JOB COST ALLOCATION BASE DIRECT COST } } Manufacturing Overhead Direct Manufacturing Labor Costs Direct Materials INDIRECT COST POOL } Direct Manufacturing Labor Indirect Costs Direct Costs } 3. See the answer to 1. 4-39 (30 min.) Allocation and proration of overhead . 1. Budgeted overhead rate = Budgeted overhead costs ÷ Budgeted labor costs = £1,500 ÷ £2,000 = 75% of labor cost 2. Ending work in process Job 1 Job 2 Total Direct material costs £25 £15 £40 Direct labor costs 20 32 52 Overhead (0.75 × Direct labor costs) 15 24 39 Total costs £60 £71 £131 Cost of goods sold = Beginning WIP + Manufacturing costs – Ending WIP = £0 + (£900 + £1,800 + £1,800 × 0.75) – £131 = £3,919 3. Overhead allocated = 0.75 × £1,800 = £1,350 Overallocated overhead = Actual overhead – Allocated overhead = £1,250 – £1,350 = £100 overallocated 4.a. All overallocated overhead is written off to cost of goods sold.
Image of page 38
4-39 WIP inventory remains unchanged. Account (1) Dec. 31, 1762 Account Balance (Before Proration) (2) Write-off of £100 Overallocated overhead (3) Dec. 31, 1762 Account Balance (After Proration) (4) = (2) + (3) Work-in-Process £ 131 £ 0 £ 131 Cost of goods sold 3,919 (100) 3,819 £4,050 £(100) £3,950 4b. Overallocated overhead prorated based on ending balances Account (1) Dec. 31, 1762 Balance (Before Proration) (2) Balance as a Percent of Total (3) = (2) ÷ £4,050 Proration of £100 Overallocated Overhead (4) = (3) × £100 Dec. 31, 1762 Balance (After Proration) (5) = (2) + (4) Work-in-Process £ 131 0.03 £ (3) £ 128 Cost of Goods Sold 3,919 0.97 (97) 3,822 £4,050 1.00 £(100) £3,950 5. Writing off all of the overallocated overhead to Cost of Goods Sold (CGS) is warranted when CGS is large relative to Work-in-Process Inventory and Finished Goods Inventory and the overallocated overhead is immaterial. Both these conditions apply in this case. Franklin & Son Printing should write off the £100 overallocated overhead to Cost of Goods Sold account. 4-40 (20 min.) Job costing, contracting, ethics. 1. Direct manufacturing costs: Direct materials Direct manufacturing labor Indirect manufacturing costs, 150% × $6,000 Total manufacturing costs $25,000 6,000 $31,000 9,000 $40,000 Aerospace bills the Navy $52,000 ($40,000 × 130%) for 100 X7 seats or $520 ($52,000 ÷ 100) per X7 seat. 2. Direct manufacturing costs: Direct materials Direct manufacturing labor a Indirect manufacturing costs, 150% × $5,000 Total manufacturing costs $25,000 5,000 $30,000 7,500 $37,500 a $6,000 – $400 ($25 × 16) setup – $600 ($50 × 12) design Aerospace should have billed the Navy $48,750 ($37,500 × 130%) for 100 X7 seats or $487.50 ($48,750 ÷ 100) per X7 seat.
Image of page 39

Subscribe to view the full document.

4-40 3. The problems the letter highlights (assuming it is correct) include the following: a. Costs included that should be excluded (design costs) b. Costs double-counted (setup included as both a direct cost and in an indirect cost pool) c. Possible conflict of interest in Aerospace Comfort purchasing materials from a family-related company Steps the Navy could undertake include the following: (i) Use only contractors with a reputation for ethical behavior as well as quality products or services.
Image of page 40
Image of page 41
You've reached the end of this preview.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern