Chapter 4, Problem 37P 1 Bookmark Show all steps: O ON Problem Disposition of overhead overallocation or underallocation, two indirect cost pools. 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 machine-hours 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: Assembly Department Machining Department $5,850,000 90,000 $7,812,000 Budgeted overhead Budgeted machine-hours (MH) Budgeted direct manufacturing labour-hours (DMLH) Actual manufacturing overhead costs 0 124,000 $8,234,000 $5,470,000 Machine-hours and direct manufacturing labour-hours and the ending balances (before proration of underallocated overhead) are as follows: Actual manufacturing overhead costs $5,470,000 $8,234,000 Machine-hours and direct manufacturing labour-hours and the ending balances (before proration of underallocated overhead) are as follows: Actual Machine- Hours Actual Direct Manufacturing Labour-Hours 83,200 12,800 Cost of Goods Sold Finished Goods Work-in-Process 69,000 6,900 16,100 Balance before Proration, December 31, 2016 $21,600,000 2,800,000 7,600,000 32,000 Required 1. Compute the budgeted overhead rates for the year in the Machining and Assembly Departments. 2. Compute the underallocated or overallocated overhead in each department for the year. Dispose of the underallocated or overallocated 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. Chapter 4, Problem 37P 1 Bookmark Show all steps: O ON Problem Disposition of overhead overallocation or underallocation, two indirect cost pools. 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 machine-hours 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: Assembly Department Machining Department $5,850,000 90,000 $7,812,000 Budgeted overhead Budgeted machine-hours (MH) Budgeted direct manufacturing labour-hours (DMLH) Actual manufacturing overhead costs 0 124,000 $8,234,000 $5,470,000 Machine-hours and direct manufacturing labour-hours and the ending balances (before proration of underallocated overhead) are as follows: Actual manufacturing overhead costs $5,470,000 $8,234,000 Machine-hours and direct manufacturing labour-hours and the ending balances (before proration of underallocated overhead) are as follows: Actual Machine- Hours Actual Direct Manufacturing Labour-Hours 83,200 12,800 Cost of Goods Sold Finished Goods Work-in-Process 69,000 6,900 16,100 Balance before Proration, December 31, 2016 $21,600,000 2,800,000 7,600,000 32,000 Required 1. Compute the budgeted overhead rates for the year in the Machining and Assembly Departments. 2. Compute the underallocated or overallocated overhead in each department for the year. Dispose of the underallocated or overallocated 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
