Question 3

Campbell Limited is a manufacturer of telecommunication switches. The company uses job order costing to assign costs to its product. During 2019, Campbell manufactured a Switch for Eastlink Communications. Cost information related to the Switch is presented below:

EastLink Switch

Direct materials $325,000

Direct labour $740,000

Campbell uses a predetermined overhead rate to allocate manufacturing overhead costs to its switches and has chosen machine hours as the cost driver. Campbell estimated that during 2019, they would use 100,000 machine hours for all jobs and estimated total manufacturing overhead for 2019 at $8,500,000.

Actual machine hours used on the Eastlink Switch amounted to 9,200 hours. Total actual machine hours for the year 2019 amounted to 104,000 hours and total actual manufacturing overhead for 2019 was $8,788,000.

Selected balances at year-end were as follows:

Account	Ending Balances
Work-in-Process	$3,200,000
Finished Goods	$8,000,000
Cost of Goods Sold	$28,800,000

Required

1. Determine the total manufacturing cost for the Eastlink Switch.
   1. Under normal costing
   2. Under actual costing

2. Determine the amount of over-allocated/under-allocated overhead for 2019.

3. Prepare the entry to dispose of the over-allocated/under-allocated overhead assuming Campbell uses:
   1. Immediate write-off to Cost of Goods Sold
   2. Proration based on ending balances of Cost of Goods Sold, Finished Goods and Work-in-Process
4. What method would you recommend Campbell use to dispose of the over-allocated/under-allocated overhead? ain. Expl