Holland Builders uses normal costing and allocates manufacturing overhead to jobs based on a budgeted labor-hour rate
Question:
Holland Builders uses normal costing and allocates manufacturing overhead to jobs based on a budgeted labor-hour rate and actual direct labor-hours. Under- or overallocated overhead, if immaterial, is written off to cost of goods sold. During 2020, Holland recorded the following:
Required
1. Compute the budgeted manufacturing overhead rate.
2. Prepare the summary journal entry to record the allocation of manufacturing overhead.
3. Compute the amount of under- or overallocated manufacturing overhead. Is the amount significant enough to warrant proration of overhead costs, or would it be permissible to write it off to cost of goods sold? Prepare the journal entry to dispose of the under- or overallocated overhead.
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9780135628478
17th Edition
Authors: Srikant M. Datar, Madhav V. Rajan