WW Fabrication WW Fabrication is a manufacturer of exceptionally high-end accessories. While they make a number of different products, including purses, scarves, and suspenders, they are most well-known for their Wonder- Woman-inspired belts. Given the specialized nature of their production, WW Fabrication uses a job costing system. Based on historical data and interviews with managers throughout the business, WW Fabrication uses direct labor hours to allocate overhead to jobs. Relevant production information for WW Fabrication appears below: Budgeted manufacturing overhead costs Budgeted direct manufacturing labor hours Actual manufacturing overhead costs Actual direct manufacturing labor hours $480,000 32,000 $496,000 31,000 PART 1 - The cost of Job 7751 The team working with Diana Prince, a new Product Manager at WW Fabrication, just completed a belt order for a prestigious client, Job 7751. Relevant information for Job 7751 appears below: Actual direct materials costs Actual direct manufacturing labor hours Actual direct manufacturing labor rate $3,600 80 $20 1. Assume that WW Fabrication uses normal costing. What is the cost that will be applied to Job 7751? 2. Assume that WW Fabrication uses actual costing. What is the cost that will be applied to Job 7751? PART 2-Using direct labor hours as allocation base Pinocchio (a good friend of Mister Geppetto), thinks that overhead costs should be allocated based on direct labor hours. It takes 1 direct labor hour to produce a single wooden truck, and 2 direct labor hours to produce a single wooden tractor. a. Using direct labor hours to allocate overhead costs, what is the total cost of manufacturing the toy trucks? The toy tractors? b. Using direct labor hours to allocate overhead costs, what is the income from each order? c. Which allocation base would you advise Mister Geppetto to use? Why? WW Fabrication PART 2 - Year end adjustments under a normal costing system Assume WW Fabrication stuck with a normal costing system. Diana has successfully navigated her first year with WW Fabrication, and is now learning how to close out the books at the end of the year. She needs to deal with the fact that the amount of overhead allocated to jobs during the year is not the same as the amount of overhead the company actually incurred. 3. Diana thinks it would be wise to track the total cost of each individual job, now that the actual overhead information is available. Calculate the adjustment Diana should make to Job 7751 using the adjusted allocation rate approach. What is the total amount of overhead that will be applied to Job 7751 after the adjustment is complete? WW Fabrication 4. Now that the year has closed, Diana is sorting out the difference between how much overhead was actually incurred compared to how much was applied to jobs during the year using normal costing. a. Calculate the total amount of overhead applied to all jobs. b. Calculate the (overapplied) or underapplied overhead for the entire company. C. Explain two reasons the overhead applied could differ from overhead actually incurred. WW Fabrication PART 3 - Year end adjustments using proration 5. Diana's counterpart, Bruce Wayne, is less convinced that WW Fabrication should expend the effort to calculate the cost of each individual job at year end. He recommends the proration approach. The finance group has provided Diana with the following information, which applies to the entire organization: Inventory-related Balances as of 12/31/2018 Accounts Total balance (unadjusted) Work-in-process $ 40,000 Finished goods 60,000 Cost of goods sold 1,900,000 Total $2,000,000 Overhead included in balance (unadjusted) $ 7,200 12,000 460,800 $480,000 a. Calculate the adjusted year end balances of the inventory accounts using proration based on unadjusted inventory account balances. WW Fabrication b. Calculate the adjusted year end balances of the inventory accounts using proration based on overhead in unadjusted inventory account balances