The HeatRadiator Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as the cost-allocation base. The following data are for 2017: Read the requirements2. Requirement 1. Compute the budgeted manufacturing overhead rate for 2017. Begin by selecting the formula you will use. Then, enter the amounts and calculate the rate. Budgeted manufacturing (1) / (2) = overhead rate / = Requirement 2. Compute the under-or overallocated manufacturing overhead of Heat Radiator in 2017. Begin by selecting the formula you will use. Next, enter the amounts in the formula and compute the under-or overallocated manufacturing overhead. (Use parentheses or a minus sign when entering overallocated amounts.) Manufacturing overhead (3) – (4) = under-allocated (overallocated) – = a. Dispose of this amount using a write-off to Cost of Goods Sold. Show the account balances after the write-off. Account Balance After Proration Cost of Goods Sold Finished Goods Control Work-in-Process Control b. Dispose of the amount using a proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold. Begin by selecting the formula to calculate the adjustment to each account. Then enter the amounts in the formula. (Enter the proportions as a decimal to three decimal places, "X.XXX". Use a minus sign or parentheses to show overallocated amounts and adjustments to be subtracted.) (5) x (6) = Adjustment COGS x = FG x = WIP x = Now enter the account balances after the write-off. Account Balance After Proration Cost of Goods Sold Finished Goods Control Work-in-Process Control c. Dispose of the amount using a proration based on the overhead allocated in 2017 (before proration) in the ending balances of Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold. Begin by selecting the formula to calculate the adjustment to each account. Then enter the amounts in the formula. (Enter the proportions as a decimal to three decimal places, "X.XXX". Use a minus sign or parentheses to show overallocated amounts and adjustments to be subtracted.) (7) x (8) = Adjustment COGS x = FG x = WIP x = Now enter the account balances after the write-off. Account Balance After Proration Cost of Goods Sold Finished Goods Control Work-in-Process Control Requirement 3. Which method do you prefer in requirement 2? Explain. Alternative (9) is theoretically preferred over (10) . This alternative yields the same ending balances in work in process, finished goods, and cost of goods sold that would have been reported (11) . 1: Data Table Budgeted manufacturing overhead costs $5,850,000 Overhead allocation base Machine-hours Budgeted machine-hours 90,000 Manufacturing overhead costs incurred $6,000,000 Actual machine-hours 85,000 Machine-hours data and the ending balances (before proration of under-or overallocated overhead) are as follows: Actual Machine-Hours 2017 End-of-Year Balance Cost of Goods Sold 68,000 $8,800,000 Finished Goods Control 10,000 1,650,000 Work-in-Process Control 7,000 550,000 2: Requirements 1. Compute the budgeted manufacturing overhead rate for 2017. 2. Compute the under-or overallocated manufacturing overhead of Heat Radiator in 2017. Dispose of this amount using the following: a. Write-off to Cost of Goods Sold b. Proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold c. Proration based on the overhead allocated in 2017 (before proration) in the ending balances of Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold 3. Which method do you prefer in requirement 2? Explain.

The HeatRadiator Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as the cost-allocation base. The following data are for 2017: Read the requirements2. Requirement 1. Compute the budgeted manufacturing overhead rate for 2017. Begin by selecting the formula you will use. Then, enter the amounts and calculate the rate. Budgeted manufacturing (1) / (2) = overhead rate / = Requirement 2. Compute the under-or overallocated manufacturing overhead of Heat Radiator in 2017. Begin by selecting the formula you will use. Next, enter the amounts in the formula and compute the under-or overallocated manufacturing overhead. (Use parentheses or a minus sign when entering overallocated amounts.) Manufacturing overhead (3) – (4) = under-allocated (overallocated) – = a. Dispose of this amount using a write-off to Cost of Goods Sold. Show the account balances after the write-off. Account Balance After Proration Cost of Goods Sold Finished Goods Control Work-in-Process Control b. Dispose of the amount using a proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold. Begin by selecting the formula to calculate the adjustment to each account. Then enter the amounts in the formula. (Enter the proportions as a decimal to three decimal places, "X.XXX". Use a minus sign or parentheses to show overallocated amounts and adjustments to be subtracted.) (5) x (6) = Adjustment COGS x = FG x = WIP x = Now enter the account balances after the write-off. Account Balance After Proration Cost of Goods Sold Finished Goods Control Work-in-Process Control c. Dispose of the amount using a proration based on the overhead allocated in 2017 (before proration) in the ending balances of Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold. Begin by selecting the formula to calculate the adjustment to each account. Then enter the amounts in the formula. (Enter the proportions as a decimal to three decimal places, "X.XXX". Use a minus sign or parentheses to show overallocated amounts and adjustments to be subtracted.) (7) x (8) = Adjustment COGS x = FG x = WIP x = Now enter the account balances after the write-off. Account Balance After Proration Cost of Goods Sold Finished Goods Control Work-in-Process Control Requirement 3. Which method do you prefer in requirement 2? Explain. Alternative (9) is theoretically preferred over (10) . This alternative yields the same ending balances in work in process, finished goods, and cost of goods sold that would have been reported (11) . 1: Data Table Budgeted manufacturing overhead costs $5,850,000 Overhead allocation base Machine-hours Budgeted machine-hours 90,000 Manufacturing overhead costs incurred $6,000,000 Actual machine-hours 85,000 Machine-hours data and the ending balances (before proration of under-or overallocated overhead) are as follows: Actual Machine-Hours 2017 End-of-Year Balance Cost of Goods Sold 68,000 $8,800,000 Finished Goods Control 10,000 1,650,000 Work-in-Process Control 7,000 550,000 2: Requirements 1. Compute the budgeted manufacturing overhead rate for 2017. 2. Compute the under-or overallocated manufacturing overhead of Heat Radiator in 2017. Dispose of this amount using the following: a. Write-off to Cost of Goods Sold b. Proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold c. Proration based on the overhead allocated in 2017 (before proration) in the ending balances of Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold 3. Which method do you prefer in requirement 2? Explain.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 22E: Silven Company has identified the following overhead activities, costs, and activity drivers for the...

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The HeatRadiator Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as the cost-allocation base. The following data are for 2017:

Read the

requirements2.

Requirement 1. Compute the budgeted manufacturing overhead rate for

2017.

Begin by selecting the formula you will use. Then, enter the amounts and calculate the rate.

					Budgeted manufacturing
	(1)	/	(2)	=	overhead rate

Requirement 2. Compute the under-or overallocated manufacturing overhead of

Heat

Radiator in

2017.

Begin by selecting the formula you will use. Next, enter the amounts in the formula and compute the under-or overallocated manufacturing overhead. (Use parentheses or a minus sign when entering overallocated amounts.)

					Manufacturing overhead
	(3)	–	(4)	=	under-allocated (overallocated)

–

a. Dispose of this amount using a write-off to Cost of Goods Sold. Show the account balances after the write-off.

	Account Balance
	After Proration
Cost of Goods Sold
Finished Goods Control
Work-in-Process Control

b. Dispose of the amount using a proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold. Begin by selecting the formula to calculate the adjustment to each account. Then enter the amounts in the formula. (Enter the proportions as a decimal to three decimal places, "X.XXX". Use a minus sign or parentheses to show overallocated amounts and adjustments to be subtracted.)

(5)

(6)

Adjustment

COGS	x	=
FG	x	=
WIP	x	=

Now enter the account balances after the write-off.

	Account Balance
	After Proration
Cost of Goods Sold
Finished Goods Control
Work-in-Process Control

c. Dispose of the amount using a proration based on the overhead allocated in

2017 (before proration) in the ending balances of Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold. Begin by selecting the formula to calculate the adjustment to each account. Then enter the amounts in the formula. (Enter the proportions as a decimal to three decimal places, "X.XXX". Use a minus sign or parentheses to show overallocated amounts and adjustments to be subtracted.)

(7)

(8)

Adjustment

COGS	x	=
FG	x	=
WIP	x	=

Now enter the account balances after the write-off.

	Account Balance
	After Proration
Cost of Goods Sold
Finished Goods Control
Work-in-Process Control

Requirement 3. Which method do you prefer in requirement 2? Explain.

Alternative

(9)

is theoretically preferred over

(10)

This alternative yields the same ending balances in work in process, finished goods, and cost of goods sold that would have been reported

(11)

1: Data Table

Budgeted manufacturing overhead costs	$5,850,000
Overhead allocation base	Machine-hours
Budgeted machine-hours	90,000
Manufacturing overhead costs incurred	$6,000,000
Actual machine-hours	85,000

Machine-hours data and the ending balances (before proration of under-or overallocated overhead) are as follows:

	Actual Machine-Hours	2017 End-of-Year Balance
Cost of Goods Sold	68,000	$8,800,000
Finished Goods Control	10,000	1,650,000
Work-in-Process Control	7,000	550,000

2: Requirements

1.	Compute the budgeted manufacturing overhead rate for 2017.
2.	Compute the under-or overallocated manufacturing overhead of Heat Radiator in 2017. Dispose of this amount using the following:
	a.	Write-off to Cost of Goods Sold
b.	Proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold
c.	Proration based on the overhead allocated in 2017 (before proration) in the ending balances of Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold
3.	Which method do you prefer in requirement 2? Explain.

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