Question
Moira Company has just finished its first year of operations and must decide which method to use for adjusting cost of goods sold. The company
Moira Company has just finished its first year of operations and must decide which method to use for adjusting cost of goods sold. The company used a budgeted indirect-cost rate for its manufacturing operations. Machine hours are used to allocate fabrication. Direct labor hours were used to allocate assembly. Moira had the following information
Budgeted amount | Fabrication | Assembly |
Factory overhead | $500,000 | $1,000,000 |
Machine hours | 4,000 | 20,000 |
Direct labour cost | 125,000 | 250,000 |
Direct labour hours | 12,500 hours | 25,000 hours |
Job 500 job cost sheet indicated the following
Budgeted amount | Fabrication | Assembly |
Direct materials | $5,000 | $10,000 |
Machine hours | 300 | 300 |
Direct labour cost | $9,000 | $8,000 |
Direct labour hours | 600 | 400 |
At the end of the year total factory overhead for fabrication is $660,000 and there was 4,500 machine hours in the fabrication department and 21,000 machine hours in the assembly department.
Ending balances in the relevant accounts were:
Work-in-Process $40,000
Finished Goods 80,000
Cost of Goods Sold 680,000
a. Determine the cost of Job 500.
b. Prepare a journal entry to write off the difference between allocated and actual
overhead directly to Cost of Goods Sold. Be sure your journal entry closes the
related overhead accounts.
c. Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started