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ACCTG424 (4)
Chapter 4

Chapter 4 In Class questions_solutions_only.pdf

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Trish Stringer

In Class #4.1 Allocation of manufacturing overhead and disposition of over-applied or under-applied Required 1 Prepare a detailed schedule showing the ending balances in the inventories and cost of goods sold (before considering any under-applied or over-applied manufacturing overhead). Show also the manufacturing overhead allocated to these ending balances. Budgeted manufacturing = Budgeted manufacturing overhead costs overhead cost rate Direct manufacturing labour costs $441,0=00/$630,000 = $0.70 per direct labour dollar The Work-in-Process inventory breakdown at the end of 2013 for Jobs 17 and 18 is: Job 17 Job 18 Total Direct materials (given) $30,600 $ 56,800 $ 87,400 Direct manufacturing labour(given) 15,000 48,000 63,000 Manufacturing overhead allocated, 70%  DL dollars 10,500 33,600 44,100 mTanalactursgn $56,100 $138,400 $194,500 So you know that total FG is $204,500 (given) and there is $60,000 DL component in that amount (given). Therefore as MOH is 0.7 x DL$, MOH in FG is 60,000 x 0.70 = $42,000. You know DL and MOH in the FG account ... and you know that total FG is $204,500. Therefore DM must be ??? $102,500. (okay now FG is done). In looking at WIP .... you know WIP for DL "ending" from the jobs outstanding (Jobs 17 & 18 calculated above)... you should have DL of $63,000. That means that if you have $650,000 as the debit for DL, the credit must be $650,000 - 63,000 or $587,000. If $587,000 of DL went to FG but only $60,000 (given) is left in FG, that means COGS received $527,000 of DL. If DL in COGS is $527,000 that means that MOH in COGS is 527,000 x 0.70 = $368,900. If DL in COGS is $527,000 and MOH is $368,900 therefore DM is $1,304,100 for a total of COGS of $2,200,000 (given). Now working backwards you can get DM for the WIP account. The summary account information is: Manufacturing Direct OverheMaanufacturiDnirect TotalAllocatedLabouMraterials Work in process $ 87,400 $ 63,000 $ 44,100 $ 194,500 Finished goods 102,500 60,00042,0 00 204,500 Cost of goods sold 1,304,100 527,000 368,900 2,200,000 Total $1,494,000 $650,000 $455,000 $2,599,000 Required 2 Compute the under-applied or over-applied manufacturing overhead for 2013. Overallocated Manufacturing overhead Manufacturing overhead manufacturing = allocated – incurred overhead $406,200 – $455,000 =* $48,800= *$650,000 × 0.7= $455,000 Required 3 Dispose of the under-applied or over-applied MOH computed in requirement 2 on the basis of: a. Proration Approach - The ending balances (before proration) of work-in-process, finished goods, and cost of goods sold. b. Adjusted Allocation Rate Approach - The allocated overhead amount (before proration) in the ending balances of work-in-process, finished goods, and cost o
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