Concept explainers
Allocation and proration of
Budgeted direct labor costs | $190,000 |
Budgeted overhead costs | $266,000 |
Costs of actual material used | $158,000 |
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 | $4,720 | $5,700 |
Job 12 | $5,090 | $6,900 |
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
Required
- 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.
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