Concept explainers
Proration of
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. Calculate the amount of overhead allocated in the fabrication department and the finishing department in May.
Required
- 2. Calculate the amount of under- or overallocated overhead in each department and in total.
- 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?
- 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?
Want to see the full answer?
Check out a sample textbook solutionChapter 4 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
- Please answer the following requirements a and b on these general accounting questionarrow_forwardGeneral Accountingarrow_forwardHarper, Incorporated, acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2023, for $210,000 in cash. The book value of Kinman's net assets on that date was $400,000, although one of the company's buildings, with a $60,000 carrying amount, was actually worth $100,000. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $85,000. Kinman sold Inventory with an original cost of $60,000 to Harper during 2023 at a price of $90,000. Harper still held $15,000 (transfer price) of this amount in Inventory as of December 31, 2023. These goods are to be sold to outside parties during 2024. Kinman reported a $40,000 net loss and a $20,000 other comprehensive loss for 2023. The company still manages to declare and pay a $10,000 cash dividend during the year. During 2024, Kinman reported a $40,000 net income and declared and paid a cash dividend of $12,000. It made additional inventory sales…arrow_forward
- Solve this general accounting question not use aiarrow_forwardPlease provide solution this general accounting questionarrow_forwardMichael McDowell Co. establishes a $108 million liability at the end of 2025 for the estimated site-cleanup costs at two of its manufacturing facilities. All related closing costs will be paid and deducted on the tax return in 2026. Also, at the end of 2025, the company has $54 million of temporary differences due to excess depreciation for tax purposes, $7.56 million of which will reverse in 2026. The enacted tax rate for all years is 20%, and the company pays taxes of $34.56 million on $172.80 million of taxable income in 2025. McDowell expects to have taxable income in 2026. Assuming that the only deferred tax account at the beginning of 2025 was a deferred tax liability of $5,400,000, draft the income tax expense portion of the income statement for 2025, beginning with the line "Income before income taxes." (Hint: You must first compute (1) the amount of temporary difference underlying the beginning $5,400,000 deferred tax liability, then (2) the amount of temporary differences…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education