REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
16th Edition
ISBN: 9780134789705
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 4, Problem 4.41P

Proration of overhead with two indirect cost pools. Adventure Designs makes custom backyard play structures that it sells to dealers across the Midwest. The play structures are produced in two departments, fabrication (a mostly automated department) and custom finishing (a mostly manual department). The company uses a normal-costing system in which overhead in the fabrication department is allocated to jobs on the basis of machine-hours and overhead in the finishing department is allocated to jobs based on direct manufacturing labor-hours. During May, Adventure Designs reported actual overhead of $42,600 in the fabrication department and $39,800 in the finishing department. Additional information follows:

Manufacturing overhead rate (fabrication department) $12 per machine-hour
Manufacturing overhead rate (finishing department) $20 per direct manuf. labor-hour
Machine-hours (fabrication department) for May 3,200 machine-hours
Direct manuf. labor-hours (finishing department) for May 1,800 labor-hours
Work-in-process inventory, May 31 $60,000
Finished-goods inventory, May 31 $180,000
Cost of goods sold, May $360,000

Adventure Designs prorates under- and overallocated overhead monthly to work in process, finished goods, and cost of goods sold based on the ending balance in each account.

  1. 1. Calculate the amount of overhead allocated in the fabrication department and the finishing department in May.

  Required

  1. 2. Calculate the amount of under- or overallocated overhead in each department and in total.
  2. 3. How much of the under- or overallocated overhead will be prorated to (a) work-in-process inventory (b) finished-goods inventory and (c) cost of goods sold based on the ending balance (before proration) in each of the three accounts? What will be the balance in work-in-process, finished-goods, and cost of goods sold after proration?
  3. 4. What would be the effect of writing off under- and overallocated overhead to cost of goods sold? Would it be reasonable for Adventure Designs to change to this simpler method?
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Chapter 4 Solutions

REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)

Ch. 4 - Comment on the following statement: In a...Ch. 4 - Describe three different debit entries to the...Ch. 4 - Describe three alternative ways to dispose of...Ch. 4 - When might a company use budgeted costs rather...Ch. 4 - Prob. 4.15QCh. 4 - Which of the following does not accurately...Ch. 4 - Sturdy Manufacturing Co. assembled the following...Ch. 4 - For which of the following industries would...Ch. 4 - ABC Company uses job-order costing and has...Ch. 4 - Under Stanford Corporations job costing system,...Ch. 4 - (10 min) Job costing, process costing. In each of...Ch. 4 - Actual costing, normal costing, accounting for...Ch. 4 - Job costing, normal and actual costing. Atkinson...Ch. 4 - Budgeted manufacturing overhead rate, allocated...Ch. 4 - Job costing, accounting for manufacturing...Ch. 4 - Job costing, consulting firm. Frontier Partners, a...Ch. 4 - Time period used to compute indirect cost rates....Ch. 4 - Accounting for manufacturing overhead. Creative...Ch. 4 - Job costing, journal entries. The University of...Ch. 4 - Journal entries, T-accounts, and source documents....Ch. 4 - Job costing, journal entries. Donald Transport...Ch. 4 - Job costing, unit cost, ending work in process....Ch. 4 - Job costing; actual, normal, and variation from...Ch. 4 - Job costing; variation on actual, normal, and...Ch. 4 - Proration of overhead. The Ride-On-Wave Company...Ch. 4 - Job costing, accounting for manufacturing...Ch. 4 - Service industry, job costing, law firm. Kidman ...Ch. 4 - Service industry, job costing, two direct- and two...Ch. 4 - Proration of overhead. (Z. Iqbal, adapted) The Zaf...Ch. 4 - Normal costing, overhead allocation, working...Ch. 4 - Proration of overhead with two indirect cost...Ch. 4 - General ledger relationships, under- and...Ch. 4 - Overview of general ledger relationships. Estevez...Ch. 4 - Allocation and proration of overhead. Resource...Ch. 4 - (2530 min.) Job costing, ethics. Joseph Underwood...Ch. 4 - Job costingservice industry. Market Pulse performs...
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What is Cost Allocation? Definition & Process; Author: FloQast;https://www.youtube.com/watch?v=hLhvvHvZ3JM;License: Standard Youtube License