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September 2, 2014

Homework Help: accounting

Posted by quemas on Sunday, July 27, 2008 at 9:54am.

Allocatin and proration of overhead.

Frankin & Son Printing designed and prointed alses brochures, catalogues, and pamplhets. The business was dissolved in early 1763.

Frankklin & Son Printing used a normal costing system. It has two direct cost pools, materials and labor and one indirect cool pool, overhead. Overhead was charged to printing jobs on the basis of direct labor cost. The following information owas known about the firm for 1762.

Budgeted material costs £1000
Budgeted labor costs £2000
Budgeted overhead cost £1500
Actual material costs £900
Acutual labor costs £1800
Actual overhead costs £1250

There was no work in process on January 1, 1762 and there were tow jobs in process on December 31, 1762.
The first job had used £25 of materials so far and £20 of labor.
The second job has used £15 worth of material and £32 of labor.
Franklin & Son Printing had no finished goods inventories because all printing jobs were based on orderes that, when completed, were transferred to cost of goods sold.

1. Compute the overhead allocation rate.
2. Calculate the balance in ending work in process and in cost of goods sold.
3. Calculate under-or overallocated overhead.
4. Calculate the ending balances in work in process and cost of goods sold if the under-or overallcated overhead amount is:
a. Written off to cost of goods sold
b. Prorated using the ending balance (before proration) in cost of goods sold and work-in-process control accounts.
5. Which of the methods in requirement 4 would you choose? Explain.

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