1. Calculate the ending balance in cost of goods sold if the under- or overallocated overhead amount is Prorated using the overhead allocated in 2017 (before proration) in the ending balances of cost of goods sold and work-in-process control accounts

A. $537,950 B. $539,992 C. $578,000 D. $580,200

The solution is in red. Where did the value $2200 come from?

Resource Room prints custom training material for corporations. The business was started January 1, 2017. The company uses a normal-costing system. It has two direct-cost pools, materials and labor, and one indirect-cost pool overhead. Overhead is charged to printing jobs on the basis of direct labor cost. The following information is available for 2017. Budgeted direct labor costs $190,000 Budgeted overhead costs $266,000 Costs of actual material used $158,000 Actual direct labor costs $175,000 Actual overhead costs $247,200 There were two jobs in process on December 31, 2017: Job 11 and Job 12. Costs added to each job as of December 31 are as follows: Direct materials Direct labor Job 11 $4,720 $5,700 Job 12 $5,090 $6,900 Resource Room has no finished-goods inventories because all printing jobs are transferred to cost of goods sold when completed. + Undstallecated overhead prorated based on overhead allocated before proration. Dec. 31, 2017 Allocated Overhead Account Included in Proration of $2,200 Balance Dec. 31, 2017 (Before Account Balance Underallocated Account Proration) (Before Proration Manufacturing Overhead (1) (3) (5) Work in Process $_40.050 $ 17,640" (7.2%) 0.072 $2,200 = $ 158 Cost of Goods Sold 537.950* 227,360 (92.8%) 0.928 x $2,200 = 2.042 Total $578.000 $245.000 100.0% $2.200 2$12,600 x 1.40: _$175,000 - $12,600) * 1.40 *COGS=Beginning inv + materials used + actual direct labor + allocated manufacturing overhead - ending inventory = 0 + $158,000 + 175,000 + 245,000 - 40,050 = $537,950 Dec. 31, 2017 Account Balance (After Proration) (6) = (2) + (5) $_40,208 539.992 $580,200