Question

The following information is available as of December 31, 2017 Click the icon to view the information) Donna Corporation manufactures custom cabinets for kitchens. It uses a normal costing system with two direct cost categories direct materials and direct manufacturing labor and one indirect-cost pool, manufacturing overhead costs. It provides the following information about manufacturing overhead costs for 2017 (Click the icon to view the manufacturing overhead cost information for 2017) Requirement Calculate the underallocated or overallocated manufacturing overhead at the end of 2017 Web Diper Cat Finihadde Center Begin by calculating the budgeted indirect cost rate Identify the formula and then calculate the rate (Assume the cost allocation base is direct labor hours.) = Budgeted indirect cost rate

Answer 1

Budgeted indirect cost rate = Budgeted manufacturing overhead cost / Budgeted direct manufacturing labor hours = $ 960,000 / 32000 hours 30.00 Per direct labor hour Overhead over or under allocated = Allocated overhead - Actual overhead = $ 960,000 - $ 992,000 Under allocated (32,000) Account Account balance Allocated Manufacture Overhead in each (Before account balance allocated in the current proration) year (Before proration) А B 40,000 $ 14,400 60,000 $ 24,000 $ 1,900,000 $ 921,600 S 2,000,000 $ 960,000 Allocated Manufacture Proration of under-allocated Allocated Manufacture Overhead in each Overhead Balance overhead based on Allocated account balance allocated in the current (In percentage) manufacture overhead year (After proration) C=B/S 960,000 D=C*$ 32,000 E=B+D 1.50% $ 480 $ 14,880 2.50% $ 800 $ 24.800 96.00% $ 30,720 $ 952,320 32,000 $ 992,000 Work in progress Control Finished goods Control Cost of goods sold