Question

Ch4-44 Allocation and proration of overhead. Resource Room prints custom training material for corporations. The business was started January 1, 2017. The company uses a normal-costing system. It has two direct- cost pools, materials and labor, and one indirect-cost pool, overhead. Overhead is charged to printing jobs on the basis of direct labor cost. The following information is available for 2017 Budgeted direct labor costs $190,000 Budgeted overhead costs $266,000 Costs of actual material used 5158,000 Actual direct labor costs $175,000 Actual overhead costs $247,200 There were two jobs in process on December 31, 2017: Job 11 and Job 12. Costs added to each job as of December 31 are as follows: Direct materials Direct labor Job 11 54,720 $5,700 Job 12 55,090 S6,900 Resource Room has no finished-goods inventories because all printing jobs are transferred to cost of goods sold when completed. 1. Compute the overhead allocation rate . 2. Calculate the balance in ending work in process and cost of goods sold before any adjustments for under or overallocated overhead. 3. Calculate under-or overallocated overhead, 4. Calculate the ending balances in work in process and cost of goods sold if the under- or overallocated overhead amount is as follows: a. Written off to cost of goods sold b. Prorated using the overhead allocated in 2017 (before proration) in the ending balances of cost of goods sold and work-in-process control accounts 5. Which of the methods in requirement 4 would you choose? Explain 6. Do the adjustment journal entries for method 1 and written off method. 7. Show ending balances for the related general ledger accounts using T-Count.

Answer 1

as per HomeworkLib policy i am answering first 4 questions

1 loues 1 wwwa Budgeted overehad costs/Budgeted Direct labor costs Budgeted overhead cost = 3 266000/190000 14096 Job 11 5 Ques 2 -6 Ending Work in process -7 Direct Material costs -8 Direct Labor costs 9 Overhead costs 20 1.4*Direct labor costs 1 Total costs Job 12 4,720 $ 5.700 IS 7,980S 5,090 6,900 9,660 Total $ $ S 9,810 12,600 17,640 18,400 $ 21,650 $ 40,050 3 Cost of goods sold -4 Beginning WIP 5 Add:Manufacturing costs 26 Direct materials 27 Direct labor costs 28 Overhead costs 9 1.4*Direct labor costs O Less:Ending WIP 1 Cost of goods sold 158,000 175,000 245,000 S Page 1 40,050 537,950 3 Ques 3 4 Applied overheads 5 Less"Actual overheads 6 Underallocated ocerheads 245,000 247,200 2,200 $

3b Underallocated ocerheads 2,200 38 Ques 4 39 a.direct write off 40 Account 41 Work in progress 42 Cost of goods sold dec 31 balances (before poration) 40,050 537,950 578,000 W/off underallocated overhead dec 31 balances (after poration) OS 40,050 $ 537,950 $ 1,075,900 $ 537,950 $ 1,115,950 43 dec 31 balances (before poration) % allocation 44 b.Prorated 45 Account 46 Work in progress 47 Cost of goods sold 48 49 Working 50 12600*1.4 51 (175000-12600)*1.4 Amount 796 $ 2,200 93% $ 2,200 W/off underallocated overhead 40,050 $ 17,640.00 537,950 $ 227,360.00 578,000 $ 245,000.00 to be adjusted dec 31 balances (after poration) $ 158 $ 40,208 $ 2,042 $ 539,992 580,200 17,640.00 227,360.00 53 Ques 5 54 Direct write off method should be used as the amount is immaterial