Luke Bolton joined Jackson Enterprises as controller in October 2016.

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(Click the icon for additional information about Jackson Enterprises.)

Jackson Enterprises manufactures and installs home greenhouses. The company uses a normal-costing system with two direct-cost pools, direct materials and direct manufacturing labor, and one indirect-cost pool, manufacturing overhead. In 2016, manufacturing overhead was allocated to jobs at 150% of direct manufacturing labor cost. At the end of 2016, an immaterial amount of underallocated overhead was closed out to cost of goods sold, and the company showed a small loss.

Bolton is eager to impress his new employer, and he knows that in 2017, Jackson's upper management is under pressure to show a profit in a challenging competitive environment because they are hoping to be acquired by a large private equity firm sometime in 2018.

At the end of 2016, Bolton decides to adjust the manufacturing overhead rate to 170% of direct labor cost. He explains to the company president that, because overhead was underallocated in 2016,this adjustment is necessary. Cost information for 2017

follows:

Data table

Direct materials control, 1/1/2017	26,000
Direct materials purchased, 2017	620,000
Direct materials added to production, 2017	600,000
Work in process control, 1/1/2017	230,000
Direct manufacturing labor, 2017	930,000
Cost of goods manufactured, 2017	3,020,680
Finished goods control, 1/1/2017	179,000
Finished goods control, 12/31/2017	323,840
Manufacturing overhead costs, 2017	1,400,000

Jackson's revenue for 2017 was $5,244,000, and the company's selling and administrative expenses were $2,530,000.

Requirements. Create T accounts and show calculations/formulas.

1.	Insert the given information in the T-accounts provided. Calculate the following amounts to complete the T-accounts:
	a.	Direct materials control, 12/31/2017
	b.	Manufacturing overhead allocated, 2017
	c.	Cost of goods sold, 2017
2.	Calculate the amount of under- or overallocated manufacturing overhead.
3.	Calculate Jackson's net operating income under the following:
	a.	Under- or overallocated manufacturing overhead is written off to cost of goods sold.
	b.	Under- or overallocated manufacturing overhead is prorated based on the ending balances in work in process, finished goods, and cost of goods sold.
4.	Bolton chooses option 3a above, stating that the amount is immaterial. Comment on the ethical implications of his choice. Do you think that there were any ethical issues when he established the manufacturing overhead rate for 2017 back in late 2016? Refer to the IMA Statement of Ethical Professional Practice.

Requirement 1. Insert the given information in the T-accounts below. Calculate the following amounts to complete the T-accounts: (a) Direct materials control,12/31/2017,(b) Manufacturing overhead allocated,2017,and (c) Cost of goods sold,2017.

(Abbreviations used: COGM = cost of goods manufactured, COGS = cost of goods sold, Dir = direct, Dir. Matls = direct materials, MOH = manufacturing overhead, and OH = overhead.)

Homework: 2-1 MyAccountingLab Homework: Chapter 4 Score: 0 ot 5 pts P4-45 (similar to) HW Score: 63 4% 78 53 at 45 pts Question Help Luke Bolton jained Jackson Emterprises as controler in October 2016 At the end of 2016. Bolton decides to dust the manufacturing overhead rate to 170% of direct labor cost he explains to the company president that, because overhead was underslocated in 2016, tis austment is neceasary. Cost information for 2017 folows (Cick the icon for addional information about Jacksen Enterprises. Bolton eager to impress his new employr, and he kows that in 2017, Jacksons upper managemet is under pressure to show a proft in a challenging cmpatve environmant because thay ara haping to be arquired by a lange pnvate equity fim samama n2018 o (Cick the "on to viewihe cost informaation tr 2017 } Jacksonsrevenue for 2017 was 55.244 000, and the company's seling and acmiistrative expenses were 52530000 Read the euircmsnts aproft in s challerging(Cick Requi entent In en t en intar matin n tha acon nts belo ale iste 'ha t a Y an ountscamp te the T accounts cest of goods sold, Dr-drect Cir. Matis-dract matenas, MOH-mnufacturing owerhoad, and CH-owerhcad a Direct m ls contro 31. 017 Man tact nn a em kad ali ated 17 ano e ost o o da g d 2017 At re aliana used co o ods manda tured C S- Direct iMore Into Muterials Control Bal. 1/1/20 Matls used ackson Entarpnses manufactures and instals home grearhousas. The company uses normal. costing system with two direct-cost pools, direct materials and direct r Matls purch 1 Insert tha givan intamation in tha T-accounts promdad Caiculata the tolawing amounts to completc the T account: a. Direct materizls control, 12/31/2017 b. Manufacturing owerhead alocated, 2017 c. Costofgoods sold, 2017 labor cost. At the end cf 201G, an mmatanal amount of undoraliccatad overhoad was closed out to cost of goods sold, and the company showed small loss. 46000 Ba 2. Caculsle the amount of unnder- or cveralocaled maacturing overhead 3, Calculste Jacksons net operating income under he folkwing a. Unger. or ow"alocated manufacarm verhaad aritten o" to cost of goods sold b. Under or overaloc a Control OH Control manufacturing cvarhead&prorated based on the Data Table ending blances in work in process, finiched goods, and cost of goods sold . Boton chooses option 3a above, stating that the amount is immaterial Comment onthe ethical implications of hs choice Do you Fink hat there were any athca ssuas when ha astab shed the matactunna o.ne rate for 2017 back in late 20167 Rier to the IMA Statemant of Ethical Professional Bal. Diract matonals control, 11/2017 Direct materials purchased, 201 Direct matenals added to production, 2017 Work in process contrel, 11/2017 Direct manufacturing labor, 2017 Cast of goods manutactrad, 211 Finshed goods control, 1r1/2017 Firished goods contol, 12/31/2017 Manuractunng owahoad csts, 201 26,000 620,000 600,000 230,000 930,000 3 12590 179,000 323,80 OH Allocated Cost of Goods Sold Bal Choose from any ist or cnter any number in the input ficlds and then click Chock Answer 4 Homework: 2-1 MyAccountingLab Homework: Chapter 4 Score: 0 ot 5 pts P4-45 (similar to) HW Score: 63 4% 78 53 at 45 pts Question Help Luke Bolton jained Jackson Emterprises as controler in October 2016 At the end of 2016. Bolton decides to dust the manufacturing overhead rate to 170% of direct labor cost he explains to the company president that, because overhead was underslocated in 2016, tis austment is neceasary. Cost information for 2017 folows (Cick the icon for addional information about Jacksen Enterprises. Bolton eager to impress his new employr, and he kows that in 2017, Jacksons upper managemet is under pressure to show a proft in a challenging cmpatve environmant because thay ara haping to be arquired by a lange pnvate equity fim samama n2018 o (Cick the "on to viewihe cost informaation tr 2017 } Jacksonsrevenue for 2017 was 55.244 000, and the company's seling and acmiistrative expenses were 52530000 Read the euircmsnts aproft in s challerging(Cick Requi entent In en t en intar matin n tha acon nts belo ale iste 'ha t a Y an ountscamp te the T accounts cest of goods sold, Dr-drect Cir. Matis-dract matenas, MOH-mnufacturing owerhoad, and CH-owerhcad a Direct m ls contro 31. 017 Man tact nn a em kad ali ated 17 ano e ost o o da g d 2017 At re aliana used co o ods manda tured C S- Direct iMore Into Muterials Control Bal. 1/1/20 Matls used ackson Entarpnses manufactures and instals home grearhousas. The company uses normal. costing system with two direct-cost pools, direct materials and direct r Matls purch 1 Insert tha givan intamation in tha T-accounts promdad Caiculata the tolawing amounts to completc the T account: a. Direct materizls control, 12/31/2017 b. Manufacturing owerhead alocated, 2017 c. Costofgoods sold, 2017 labor cost. At the end cf 201G, an mmatanal amount of undoraliccatad overhoad was closed out to cost of goods sold, and the company showed small loss. 46000 Ba 2. Caculsle the amount of unnder- or cveralocaled maacturing overhead 3, Calculste Jacksons net operating income under he folkwing a. Unger. or ow"alocated manufacarm verhaad aritten o" to cost of goods sold b. Under or overaloc a Control OH Control manufacturing cvarhead&prorated based on the Data Table ending blances in work in process, finiched goods, and cost of goods sold . Boton chooses option 3a above, stating that the amount is immaterial Comment onthe ethical implications of hs choice Do you Fink hat there were any athca ssuas when ha astab shed the matactunna o.ne rate for 2017 back in late 20167 Rier to the IMA Statemant of Ethical Professional Bal. Diract matonals control, 11/2017 Direct materials purchased, 201 Direct matenals added to production, 2017 Work in process contrel, 11/2017 Direct manufacturing labor, 2017 Cast of goods manutactrad, 211 Finshed goods control, 1r1/2017 Firished goods contol, 12/31/2017 Manuractunng owahoad csts, 201 26,000 620,000 600,000 230,000 930,000 3 12590 179,000 323,80 OH Allocated Cost of Goods Sold Bal Choose from any ist or cnter any number in the input ficlds and then click Chock Answer 4