Question
P4-46 Value Premium performs market research for consumer product companies across the country. The company conducts telephone surveys and gathers consumers together in focus groups
P4-46
Value Premium performs market research for consumer product companies across the country. The company conducts telephone surveys and gathers consumers together in focus groups to review foods, cleaning products, and toiletries. Value Premium uses a normal-costing system with one direct-cost pool, labor, and one indirect-cost pool, general overhead. General overhead is allocated to each job based on 140% of direct labor cost. Actual overhead equaled allocated overhead as of April 30, 2017. Actual overhead in May was $ 105, 600.
(MORE INFO)
All costs incurred during the planning stage for a market research job and during the job are gathered in a balance sheet account called "Jobs in Progress (JIP)." When a job is completed, the costs are transferred to an income statement account called "Cost of Completed Jobs (CCJ)."
Following is cost information for May 2017:
From Beginning JIP | Incurred in May | |||
General | ||||
Overhead | ||||
Band | Labor | Allocated | Labor | |
Nibble Candy Bars | $45,280 | $25,000 | $13,000 | |
Blaze Toothpaste | 31,120 | 7,000 | 31,000 | |
Rojo Organic Salsa | - | - | 21,600 | |
Glow Dish Liquid | - | - | 5,900 | |
As of May 1, there were two jobs in progress: Nibble Candy Bars, and Blaze Toothpaste. The jobs for Rojo Organic Salsa and Glow Dish Liquid were started during May. The jobs for Nibble Candy Bars and Glow Dish Liquid were completed during May.
Requirements
1. | Calculate JIP at the end of May. *** Show work*** | |
2. | Calculate CCJ for May. *** Show Work*** | |
3. | Calculate under- or overallocated overhead at the end of May. . *** Show Work*** | |
4. | Calculate the ending balances in JIP and CCJ if the under- or overallocated overhead amount is as follows: . *** Show Work*** | |
a. | Written off to CCJ | |
b. | Prorated based on the ending balances (before proration) in JIP and CCJ | |
c. | Prorated based on the overhead allocated in May in the ending balances of JIP and CCJ (before proration) | |
5. | Which method would you choose? Explain. Would your choice depend on whether overhead cost is underallocated or overallocated? Explain. |
Requirement 1. Calculate JIP at the end of | |
May. | |
| Balance at the |
Job | end of May |
Rojo Organic Salsa | $51,840 |
Blaze Toothpaste | 112,520 |
Total | $164,360 |
Requirement 2. Calculate CCJ for | |
May. | |
| Balance at the |
Job | end of May |
|
|
|
|
Total |
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started