Question $45$

Benny Industries allocates manufacturing overhead at a predetermined rate of $160\%$ of direct labor cost. Any overallocated or underallocated overhead is closed to the cost of goods sold at the end of the month. Below is information on job $205$ that was in process at the end of the month of October:

Direct materials $$40,000$

Direct labor $$30,000$

Allocated manufacturing overhead $$48,000$

Jobs $206,207,208$ and $209$ were started in November. Direct materials that were used in November to complete Job $205$ and assigned to the three new jobs were $$260,000$ and direct labor costs were $$210,000.$ For the month of November, actual manufacturing overhead was $$320,000.$ The only job still in process on the last day of November was job $207$ which had accumulated the following costs: $$30,000$ for direct materials and $$15,000$ for direct labor and job $209$ which had $$25,000$ of direct materials and $$20,000$ of direct labour.

Required:

a$)$ Calculate the cost of goods manufacturered for the month of November. You do not need to provide this in good form, but show calculations.

b$)$ Calculate the amount of overallocated or underallocated manufacturing overhead that should be closed to cost of goods sold and provide the accounting journal entry for the adjustment on November $30.$ Be sure to label the answer as either overallocated or underallocated.

c$)$ Is the fact that there was an under or overallocated manufacturing overhead indicate that management made an error in calculating their overhead for the period. Explain why or why not