Overhead allocation and proration. Franklin & Son Printing designed and printed sales brochures, catalogues, and pamphlets. The
Question:
Overhead allocation and proration. Franklin & Son Printing designed and printed sales brochures, catalogues, and pamphlets. The business was dissolved in early 2010. The com- pany had used a normal job costing system with two direct cost categories-direct materials and direct manufacturing labour-and one indirect cost category-manufacturing overhead. Overhead was charged to printing jobs on the basis of direct labour cost. The following information was known about the firm for 2009.
There was no work-in-process at the beginning of the year and there were two jobs in process at the end of the year. The first job had used £25 of materials so far and £20 of direct labour. The second job had used £15 of materials and £32 of labour. Franklin did not carry any finished goods inventories because all printing jobs were based on orders that, when completed, were immediately transferred to cost of goods sold and delivered to the customer.
REQUIRED 1. Calculate the overhead allocation rate for 2009.
2. Calculate the balance in ending work-in-process and in cost of goods sold.
3. Calculate underallocated or overallocated overhead.
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 cost of goods sold
b. Prorated using the ending balance (before proration) in cost of goods sold and work-in-process.
5. Which of the methods in requirement 4 would you choose? Explain.LO1
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9780135004937
5th Canadian Edition
Authors: Charles T. Horngren, Foster George, Srikand M. Datar, Maureen P. Gowing