On page 135 of the book there is a discussion about the use of predetermined overhead rates for allocating manufacturing overhead costs to individual jobs.A two part question:

1. explain as the shop operations manager responsible for the actual production of products, what factors from your specific floor manager position can or did you influence through the month that may have affected actual costs versus planned/budgeted costs to be different.

2.What is one example of cost that you could not control?

old 40 Closing Manufacturing Overhead or its tread- As a final step, Life Fitness must deal with the balance in the manufacturing overhead ntory count. Since the company uses a predetermined manufacturing overhead rate to allocate "anufacturing overhead to individual jobs, the total amount allocated to jobs will most cords likely differ from the amount of manufacturing overhead actually incurred. Let's see how this plays out in the Manufacturing Overhead T-account: 1 . All manufacturing overhead costs incurred by Life Fitness were recorded as debits to the Manufacturing Overhead account. These debits total $25,000 of actual manufac turing overhead incurred. 2. On the other hand, all manufacturing overhead allocated to specific jobs ($8,000 + $16,000) was recorded as credits to the Manufacturing Overhead account: nd her Manufacturing Overhead 00 Indirect material (ACTUAL) (ALLOCATED to Jobs) $8,000 allocated 2,000 24,000 Indirect labor - 13,000 to Job 603 10,000 Other indirect 1,000 $16,000 allocated manufacturing costs to Job 604 This leaves a debit balance of $1,000 in the Manufacturing Overhead account, which means that manufacturing overhead has been underallocated during the month. More manufacturing overhead costs were incurred than were allocated to jobs. Since Manufacturing Overhead is a temporary account not shown on any of the company's financial statements, it must be closed out (zeroed out) at the end of the period. Since most of the inventory produced during the period has been sold, Life Fitness will close the bal- ance in Manufacturing Overhead to Cost of Goods Sold as follows: (12) Cost of Goods Sold 1,000 Manufacturing Overhead 1,000 (to close the manufacturing overhead account) As a result of this entry, 1) the Manufacturing Overhead account now has a zero bal- ance, and 2) the balance in Cost of Goods Sold has increased to correct for the fact that the jobs had been undercosted during the period. Manufacturing Overhead Cost of Goods Sold 2,000 24,000 154,400 13,000 10,000 1,000- Adjustment for Underallocation 1,000 155,400