Question

4-28 Accounting for manufacturing overhead. Creative Woodworking uses normal costing and allocates man ufacturing overhead to jobs based on a budgeted labor-hour rate and actual direct labor hours. Under or overal located overhead, it immaterial, is written off to Cost of Goods Sold. During 2017, Creative recorded the following Budgeted manufacturing overhead costs Budgeted direct labor-hours Actual manufacturing overhead costs Actual direct labor-hours S4,140,000 180,000 54.337,000 189.000 Required 1. Compute the budgeted manufacturing overhead rate 2. Prepare the summary journal entry to record the allocation of manufacturing overhead 3. Compute the amount of under-or overallocated manufacturing overhead. Is the amount significant enough to warrant proration of overhead costs, or should Creative Woodworking write it off to cost of goods sold? Prepare the journal entry to dispose of the under-or overallocated overhead 4-29 Job costing, journal entries. The University of Chicago Press is wholly owned by the university It performs the bulk of its work for other university departments, which pay as though the press were an outside business enterprise. The press also publishes and maintains a stock of books for general sale. The press uses normal costing to cost each job. Its job-costing system has two direct-cost categories direct materials and direct manufacturing labor) and one indirect-cost pool manufacturing overhead, allocated on the basis of direct manufacturing labor costs). ASSIGNMENT MATERIA The following data in thousands) pertain to 2017: $800 710 100 1,300 Direct materials and supplies purchased on credit Direct materials used Indirect materials issued to various production departments Direct manufacturing labor Indirect manufacturing labor incurred by various production departments Depreciation on building and manufacturing equipment Miscellaneous manufacturing overhead incurred by various production departments fordinarily would be detailed as repairs, photocopying, utilities, etc.) Manufacturing overhead allocated at 160% of direct manufacturing labor costs Cost of goods manufactured Revenues Cost of goods sold before adjustment for under-or overallocated manufacturing overhead) Inventories, December 31, 2016 inot 2017): Materials Control Work-in-Process Control Finished Goods Control 4120 8.000 4,020 Required 1. Prepare an overview diagram of the job-costing system at the University of Chicago Press 2. Prepare journal entries to summarize the 2017 transactions. As your final entry, dispose of the year-end under or overallocated manufacturing overhead as a write-off to Cost of Goods Sold Number your entries. Explanations for each entry may be omitted. 3. Show posted T-accounts for all inventories, Cost of Goods Sold, Manufacturing Overhead Control, and Manufacturing Overhead Allocated. 4. How did the University of Chicago Press perform in 2017?

Answer 1

4-28

Budgeted manf.overhead cost Budgeted manufacturing overhead = Budgeted direct labor-hours $4,140,000 180,000 = |S23 per direct labor hour Prepare the summary joumal entry to record the allocation of manufacturing overhead as follows: | Credit Debit $4,347,000 Account Work-in process control Manufacturing overhead Allocated (189,000 Actual direct labor hours x $23) $4,347.000

Compute the amount of under or over allocated manufacturing overhead: Actual manufacturing overhead costs - manufacturing overhead allocated $4,337,000 - $4,347,000 = $10,000 Overallocated Insignificant amount of difference to manufacturing overhead cost allocated ($10,000 - $4.347.000) 0.2%. If the quantities of WIP and finished goods inventories are small, the difference between proration and write off to COGS account would be very small compared to net income. Credit Debit $4,347.000 Account Manufacturing overhead Allocated Manufacturing Department overhead control COGS $4,337,000 $10,000