Job costing, service industry. Michael Scott books tours for new bands, and arranges to 1. $2,100 print T-shirts and produce demo CDs to sell on the tour. Scott’s agency uses a normal costing system with two direct cost pools, labour and materials, and one indirect cost pool, general overhead. General overhead is allocated to each tour at 150% of labour cost. The following information relates to the agency for 2010:

1. As of June 1, there were tours for two bands in progress Grunge Express and Different Strokes.

2. During June, both bands finished their tours.

3. New tours were started for three bands, As I Lay Dying, Ask Me Later, and Maybe Tomorrow. Of these bands, only Maybe Tomorrow finished its tour by the end of June.

All costs incurred during the planning stage for a tour are gathered in a balance sheet account called “Tours In Process (TIP)”. When a tour is completed, the costs are transferred to an income statement account called “Cost of Completed Tours (CCT).”

The following cost information is for June:

REQUIRED 1. Calculate the TIP for the end of June.
2. Caleulate CCT for June.
3. Calculate underallocated or overallocated overhead at the end of June.
4. Calculate the ending balances in work-in-process and cost of goods sold if the underallocated or overallocated overhead amount is:

a. Written off to CCT

b. Prorated using the ending balances (before proration) in TIP and CCT.

c. Prorated based on the overhead allocated in June in the ending balances of TIP and CCT (before proration).
5. Which of the methods in requirement 4 would you choose? Explain.LO1

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From Beginning TIP Incurred in June Materials Labour Materials Labour Grunge Express $400 $600 $ 0 $100 Different Strokes $300 $400 $175 $300 As I Lay Dying $ 0 $ 0 $250 $400 Ask Me Later $ 0 $ 0 $350 $200 Maybe Tomorrow $ 0 $ 0 $275 $400 Actual overhead in June was $2,500.