Question

Dynamic Market performs market research for consumer product companies across the country. The company conducts telephone surveys and gathers consumers together in focus groups to review foods, cleaning products m and toiletries. Dynamic Market uses a normal costing system with one direct cost pool, labor, and one indirect cost pool, general overhead. General overhead is allocated to each job based on 180% of direct labor cost. Actual overhead equaled allocated overhead as of April 30, 2017. Actual overhead in May was $139,060.

All costs incurred during the planning stage for market research job and during the job are gathered in a balance sheet called "Jobs in Progress (JIP)". When a job is completed, the costs are transferred to an income statement account called "Cost of Completed Jobs (CCJ)"

The photo below is the cost information for May 2017

WUJUDU PIOyJJ. VDDIG Udu je jobs for © Data Table Incurred in May From Beginning JIP General Overhead Band Labor Allocated Labor 11,000 35,490 $ 16,750 21,000 9,000 30,000 Nibble Candy Bars Glitter Toothpaste Maya Organic Salsa Spangle Dish Liquid 27,400 5,800 Print Done

Ad of May 1, there were two jobs in progress. Nibble Candy Bars, and Glitter Toothpaste
The jobs for Maya Organic Salsa and Spangle Dish Liquid were started during May. The jobs for Nibble Candy Bars and Spangle DISH liquid were completed during May.

1. Calculate JIP at the end of May
2. Calculate CCJ for May
3. Calculate under or overallocated overhead at the end of May.
4. Calculate the ending balances in JIP and CCJ if the under or overallocated overhead amount is as follows:
   a. Written off to CCJ
   b. Prorated based on the ending balances (before proration) in JIP and CCJ
   c. Prorated based on the overhead allocated in May in the ending balances of JIP and CCJ (before proration)
5. Which method would you choose? Explain. Would your choice depend on whether overhead cost is underallocated or overallocated? Explain

Answer 1

	From Beginning WIP		Incurred in May				Ending WIP
Band	Labor	General Overhead Allocated	Labor	General Overhead Allocated	Total	Transferred
Nibble Candy Bars	$           35,490	$              21,000	$              11,000	$             19,800	$        87,290	$       87,290	$                    -
Glitter Toothpaste	$           16,750	$                9,000	$              30,000	$             54,000	$      109,750		$        109,750
Maya Organic Salsa			$              27,400	$             49,320	$        76,720		$           76,720
Spangle Dish Liquid			$                5,800	$             10,440	$        16,240	$       16,240	$                    -
			$              74,200	$           133,560		$     103,530	$        186,470

1. JIP at the end of May = $186,470

2. CCJ for May = $103,530

3. Under (Over) Allocated Overhead = $139060 - $133560 = $5500

4. a.

	Balance	Allocation of Under allocated overhead	Ending Balance
Ending JIP	$        186,470		$            186,470
CCJ	$        103,530	$                5,500	$            109,030

b.

	Balance	Allocation of Under allocated overhead	Ending Balance
Ending JIP	$        186,470	$                3,537	$            190,007
CCJ	$        103,530	$                1,964	$            105,494
	$        290,000

c.

	Balance	Basis of allocation	Allocation of Under allocated overhead	Ending Balance
Ending JIP	$        186,470	103320	$                4,255	$           294,045
CCJ	$        103,530	30240	$                1,245	$           135,015
	$        290,000	$           133,560