In Class #4.1 Allocation of manufacturing overhead and disposition of over-applied or
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:
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
Compute the under-applied or over-applied manufacturing overhead for 2013.
Manufacturing overhead Manufacturing overhead
manufacturing = allocated – incurred
$406,200 – $455,000 =*
*$650,000 × 0.7= $455,000
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