Printing should write off the 100 overallocated

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Printing should write off the £100 overallocated overhead to Cost of Goods Sold account. Job Job Job 1 Job Job Job 2 Total Total 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 Account Account Account (1) (1) (1) Dec. Dec. Dec. 31, 31, 31, 1762 1762 1762 Account Account Account Balance Balance Balance (Before (Before (Before Proration) Proration) Proration) (2) (2) (2) Write-off Write-off Write-off of of of £ 100 100 100 Overallocated Overallocated Overallocated overhead overhead overhead (3) (3) (3) Dec. Dec. Dec. 31, 31, 31, 1762 1762 1762 Account Account Account Balance Balance Balance (After (After (After Proration) Proration) Proration) (4) (4) (4) = (2) (2) (2) + (3) (3) (3) Work-in-Process £ 131 £ 0 £ 131 Cost of goods sold 3,919 (100) 3,819 £4,050 £(100) £3,950 Account Account Account (1) (1) (1) Dec. Dec. Dec. 31, 31, 31, 1762 1762 1762 Balance Balance Balance (Before (Before (Before Proration) Proration) Proration) (2) (2) (2) Balance Balance Balance as as as a Percent Percent Percent of of of Total Total Total (3) (3) (3) = (2) (2) (2) ÷ £ 4,050 4,050 4,050 Proration Proration Proration of of of £ 100 100 100 Overallocated Overallocated Overallocated Overhead Overhead Overhead (4) (4) (4) = (3) (3) (3) £ 100 100 100 Dec. Dec. Dec. 31, 31, 31, 1762 1762 1762 Balance Balance Balance (After (After (After Proration) Proration) Proration) (5) (5) (5) = (2) (2) (2) + (4) (4) (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
4-40 4-40 4-40 4-40 (20 min.) Job Job Job costing, costing, costing, contracting, contracting, contracting, ethics. ethics. ethics. Aerospace bills the Navy $52,000 ($40,000 130%) for 100 X7 seats or $520 ($52,000 100) per X7 seat. 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. 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. (ii) Issue guidelines detailing acceptable and unacceptable billing practices by contractors. For example, prohibiting the use of double-counting cost allocation methods by contractors. (iii) Issue guidelines detailing acceptable and unacceptable procurement practices by contractors. For example, if a contractor purchases from a family-related company, require that the contractor obtain quotes from at least two other bidders. (iv)Employ auditors who aggressively monitor the bills submitted by contractors. (v) Ask contractors for details regarding determination of costs. 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 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
4-41 4-41 4-41 4-41 (35 min.) Job Job Job costing-service costing-service costing-service industry industry industry . 1. Tours in Process (TIP) June 30, 2009 2. Cost of Complete d Tours (CCT) in June 2009 3. Overhead allocated = 1.50 × 1,400 a = $2,100 Underallocated overhead = Actual overhead – Allocated overhead = $2,500 – 2,100 = $400 underallocated a Total labor in June = $100+$300+$400+$200+$400 = $1,400 4a. Underallocated overhead is written off to CCT CIP inventory remains unchanged. 4b. Underallocated overhead prorated based on ending balances 4c. Underallocated overhead prorated based on June overhead in ending balances Band Band Band Materials Materials Materials (1) (1) (1) Labor Labor Labor (2) (2) (2) Overhead Overhead Overhead (3) (3) (3) = 150% 150% 150% × (2) (2) (2) Total Total Total (4) (4) (4) Grunge Express $ 400 $ 700 $1,050 $2,150 Different Strokes 475 700 1,050 2,225 Maybe Tomorrow 275 400 600 1,275 Total $1,150 $1,800 $2,700 $5,650 Account Account Account June June June 30, 30, 30, 2009 2009 2009 Balance Balance Balance (Before (Before (Before Proration) Proration) Proration) (1) (1) (1) Proration Proration Proration of of of $400 $400 $400 Underallocated Underallocated Underallocated Overhead

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