Glavine Corporation manufactures precision equipment made to order for the semiconductor industry. Glavine uses two manufacturing overhead cost pools-one for the overhead costs incurred in its highly automated Machining Department and another for overhead costs incurred in its labour-based Assembly Department. Glavine uses a normal costing system. It allocates Machining Department overhead costs to jobs based on actual machinehours using a budgeted machine-hour overhead rate. It allocates Assembly Department overhead costs to jobs based on actual direct manufacturing labour-hours using a budgeted direct manufacturing labour-hour rate.

The following data are for the year 2016:

MachiningAssembly

Department Department

Budgeted overhead................................................$5,850,000...............$7,812,000

Budgeted machine-hours (MH)........................................90,000..........................0

Budgeted direct manufacturing labour-hours (DMLH)...................0..................124,000

Actual manufacturing overhead costs............................$5,470,000.............$8,234,000

Machine-hours and direct manufacturing labour-hours and the ending balances (before proration of under allocated overhead) are as follows:

Required
1. Compute the budgeted overhead rates for the year in the Machining and Assembly Departments.
2. Compute the under allocated or over allocated overhead in each department for the year. Dispose of the under allocated or over allocated amount in each department using:
a. Immediate write-off to Cost of Goods Sold.
b. Proration based on ending balances (before proration) in Cost of Goods Sold, Finished Goods, and Work-in-Process.
c. Proration based on the allocated overhead amount (before proration) in the ending balances of Cost of Goods Sold, Finished Goods, and Work-in-Process.
3. Which disposition method do you prefer in requirement 2? Explain.

Transcribed Image Text:

Balance before Proration, Actual Direct Actual Machine-Manufacturing Hours 69,000 6,900 16,100 Labour-HoursDecember 31, 2016 Cost of Goods Sold Finished Goods Work-in-Process 83,200 12,800 32,000 S21,600,000 2,800,000 7,600,000