Arensky Company uses normal costing to account for overhead in its job costing system. There are 2 departments in the company: Designing and Machining. The Designing Dept is labor intensive; the Machining Dept. is machine intensive. (OH = Overhead; DLH = Direct Labor Hours; MH = Machining Hours.) The budget for 2019 is as follows: Actual results are as follows: a. Est. OH Est. DLH Est. MH b. C. Actual OH Actual DLH Actual MH Designing $2,000,000 40,000 hours 20,000 hours Designing $2,100,000 41,500 hours 19,800 hours Machining $5,600,000 10,000 hours 70,000 hours Machining $5,650,000 11,000 hours 72,000 hours Using the most logical allocation base, calculate the OH Allocation Rate for eac department. Be sure to state your final answer in proper units. For each department, calculate how much OH is allocated. For each department, give the journal entry to record over- or under-allocated overhead.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Arensky Company uses normal costing to account for overhead in its job costing system.
There are
departments in the company: Designing and Machining. The Designing Dept.
is labor intensive; the Machining Dept. is machine intensive. (OH- Overhead; DLH =
Direct Labor Hours; MH = Machining Hours.) The budget for 2019 is as follows:
Actual results are as follows:
a.
b.
C.
Est. OH
Est. DLH
Est. MH
d.
Actual OH
Actual DLH
Actual MH
Designing
$2,000,000
40,000 hours
20,000 hours
Designing
$2,100,000
41,500 hours
19,800 hours
Machining
$5,600,000
10,000 hours
70,000 hours
Machining
$5,650,000
11,000 hours
72,000 hours
Using the most logical allocation base, calculate the OH Allocation Rate for eac
department. Be sure to state your final answer in proper units.
For each department, calculate how much OH is allocated.
For each department, give the journal entry to record over- or under-allocated
overhead.
Why is the Normal Costing method preferred to the Actual Costing method?
uirements
Transcribed Image Text:Arensky Company uses normal costing to account for overhead in its job costing system. There are departments in the company: Designing and Machining. The Designing Dept. is labor intensive; the Machining Dept. is machine intensive. (OH- Overhead; DLH = Direct Labor Hours; MH = Machining Hours.) The budget for 2019 is as follows: Actual results are as follows: a. b. C. Est. OH Est. DLH Est. MH d. Actual OH Actual DLH Actual MH Designing $2,000,000 40,000 hours 20,000 hours Designing $2,100,000 41,500 hours 19,800 hours Machining $5,600,000 10,000 hours 70,000 hours Machining $5,650,000 11,000 hours 72,000 hours Using the most logical allocation base, calculate the OH Allocation Rate for eac department. Be sure to state your final answer in proper units. For each department, calculate how much OH is allocated. For each department, give the journal entry to record over- or under-allocated overhead. Why is the Normal Costing method preferred to the Actual Costing method? uirements
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Overhead refers to the indirect expenses that the company incurs in the process of manufacturing a product. It includes the cost of inspection, electricity, designing, and machining. 

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