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.

Need Parts 5-7 answered

Answer 1

Answer 5) Out of the two methods, the prorata allocation of under/over-
allocated overhead should be chosen because both the heads have
inclusion of the Applied overhead and each head should be neutralized
in respect of under/over-allocated overhead.
Answer 6) Journal Entries:
a) Prorata allocation of under/over-allocation of overhead:
Date	Accounts Title	Debit $	Credit $
31-Dec	COGS	2048		(2200*537950/578000)
	WIP Inv.	152		(2200*40050/578000)
	Manuf. Overhead		2200
	(prorata allocation of the under allocated overhead)
b) Written off to COGS of under/over-allocation of overhead:
Date	Accounts Title	Debit $	Credit $
31-Dec	COGS	2200
	Manuf. Overhead		2200
	(closure of under allocated overhead to COGS)
Answer 7)Prorata method:
WIP A/C
DEBIT	AMOUNT $	CREDIT	AMOUNT $
DM	158000	FG Inv.	537950
DL	175000	CB	40202	(9810+12600+(266000*12600/190000)+152
Manuf OH	245000			(266000/190000)*175000
Manuf OH	152
Total	578152	Total	578152
Under allocation of overhead = Actual OH - Allocated OH = 247200 - 245000 = 2200
Cost of Goods Sold A/c:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
FG Inv.	537950	CB	539998
Manuf. Overhead	2048
Finished Goods Inventory a/c:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
WIP	537950	COGS	537950
Manuf. Overhead a/c:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Actual incurred	247200	WIP	245000
		COGS	2048
		WIP	152
Total	247200	Total	247200