18) Under the proration approach, the sum of the amounts shown in the subsidiary ledgers will not match the amounts shown in the general ledger because no adjustments from budgeted to actual manufacturing overhead rates are made in the individual job-cost records.
19) The actual costs of all individual overhead categories are recorded in the Manufacturing Overhead Control account.
20) Proration is the spreading of underallocated or overallocated overhead among ending work in process, finished goods, and costs of goods sold.
21) It is appropriate for service organizations such as public accounting firms to use job costing.
22) Plastic Products Company manufactures pipes and applies manufacturing costs to production at a budgeted indirect-cost rate of $12 per direct labor-hour. The following data are obtained from the accounting records for June 2014:
Direct materials $350,000
Direct labor (16,000 hours @ $11/hour) 176,000
Indirect labor 20,000
Plant facility rent 100,000
Depreciation on plant machinery and equipment 40,000
Sales commissions 50,000
Administrative expenses 60,000
Required:
a.What actual amount of manufacturing overhead costs was incurred during June 2014?
b.What amount of manufacturing overhead was allocated to all jobs during June 2014?
c.For June 2014, was manufacturing overhead underallocated or overallocated? Explain.
23) Moira Company has just finished its first year of operations and must decide which method to use for adjusting cost of goods sold. Because the company used a budgeted indirect-cost rate for its manufacturing operations, the amount that was allocated ($435,000) to cost of goods sold was different from the actual amount incurred ($425,000).
Ending balances in the relevant accounts were:
Work-in-Process $ 40,000
Finished Goods 80,000
Cost of Goods Sold 680,000
Required:
a.Prepare a journal entry to write off the difference between allocated and actual overhead directly to Cost of Goods Sold. Be sure your journal entry closes the related overhead accounts.
b.Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances. Be sure your journal entry closes the related overhead accounts.
24) Bullz Company manufactures an energy drink. The company uses a budgeted indirect-cost rate for its manufacturing operations and during 2014 allocated $1,000,000 to work-in-process inventory. Actual overhead incurred was $1,200,000.
Ending balances in the following accounts are:
Work-in-Process $ 100,000
Finished Goods 750,000
Cost of Goods Sold 4,150,000
Required:
a.Prepare a journal entry to write off the difference between allocated and actual overhead directly to Cost of Goods Sold. Be sure your journal entry closes the related overhead accounts.
b.Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances. Be sure your journal entry closes the related overhead accounts.
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