Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 4, Problem 4.41P
Proration of
| Manufacturing overhead rate (fabrication department) | $12 per machine-hour |
| Manufacturing overhead rate (finishing department) | $20 per direct manuf. labor-hour |
| Machine-hours (fabrication department) for May | 3,200 machine-hours |
| Direct manuf. labor-hours (finishing department) for May | 1,800 labor-hours |
| Work-in-process inventory, May 31 | $60,000 |
| Finished-goods inventory, May 31 | $180,000 |
| Cost of goods sold, May | $360,000 |
Adventure Designs prorates under- and overallocated overhead monthly to work in process, finished goods, and cost of goods sold based on the ending balance in each account.
- 1. Calculate the amount of overhead allocated in the fabrication department and the finishing department in May.
Required
- 2. Calculate the amount of under- or overallocated overhead in each department and in total.
- 3. How much of the under- or overallocated overhead will be prorated to (a) work-in-process inventory (b) finished-goods inventory and (c) cost of goods sold based on the ending balance (before proration) in each of the three accounts? What will be the balance in work-in-process, finished-goods, and cost of goods sold after proration?
- 4. What would be the effect of writing off under- and overallocated overhead to cost of goods sold? Would it be reasonable for Adventure Designs to change to this simpler method?
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Activity-Based Costing
Cardio Care Inc. manufactures stationary bicycles and treadmills. The products are produced in the Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:
Activity
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$22 per machine hour (mh)
Assembly
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Setup
$40 per setup
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$20 per inspection
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$4 per purchase order
The activity-base usage quantities and units produced for each product were as follows:
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Hails Corporation manufactures two products: Product Q21F and Product
H44W. The company uses a plantwide overhead rate based on direct labor-
hours. It is considering implementing an activity-based costing (ABC) system
that allocates its manufacturing overhead to four cost pools. The following
additional information is available for the company as a whole and for Products
Q21F and H44W.
Activity Cost Pool
Machining
Machine setups
Product design
Order size
Machine-hours
Number of setups
Number of products
Direct labor-hours
26.71%
50.00%
34.18%
Activity Measure
O 60.89%
Machine-hours
Number of setups
Number of products
Direct labor-hours
Activity Measure
Total Cost Total Activity
$ 195,000 13,000 MHs
90,000 150 setups
$
$ 64,000
$
280,000
Product Q21F
9,000
80
1
6,000
Using the ABC system, the percentage of the total overhead cost that is
assigned to Product Q21F is closest to:
2 products
10,000 DLHs
Product H44W
4,000
70
1
4,000
Chapter 4 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 4 - Define cost pool, cost tracing, cost allocation,...Ch. 4 - How does a job-costing system differ from a...Ch. 4 - Why might an advertising agency use job costing...Ch. 4 - Describe the seven steps in job costing.Ch. 4 - Give examples of two cost objects in companies...Ch. 4 - Describe three major source documents used in...Ch. 4 - What is the advantage of using computerized source...Ch. 4 - Give two reasons why most organizations use an...Ch. 4 - Distinguish between actual costing and normal...Ch. 4 - Describe two ways in which a house-construction...
Ch. 4 - Comment on the following statement: In a...Ch. 4 - Describe three different debit entries to the...Ch. 4 - Describe three alternative ways to dispose of...Ch. 4 - When might a company use budgeted costs rather...Ch. 4 - Prob. 4.15QCh. 4 - Which of the following does not accurately...Ch. 4 - Sturdy Manufacturing Co. assembled the following...Ch. 4 - For which of the following industries would...Ch. 4 - ABC Company uses job-order costing and has...Ch. 4 - Under Stanford Corporations job costing system,...Ch. 4 - (10 min) Job costing, process costing. In each of...Ch. 4 - Actual costing, normal costing, accounting for...Ch. 4 - Job costing, normal and actual costing. Atkinson...Ch. 4 - Budgeted manufacturing overhead rate, allocated...Ch. 4 - Job costing, accounting for manufacturing...Ch. 4 - Job costing, consulting firm. Frontier Partners, a...Ch. 4 - Time period used to compute indirect cost rates....Ch. 4 - Accounting for manufacturing overhead. Creative...Ch. 4 - Job costing, journal entries. The University of...Ch. 4 - Journal entries, T-accounts, and source documents....Ch. 4 - Job costing, journal entries. Donald Transport...Ch. 4 - Job costing, unit cost, ending work in process....Ch. 4 - Job costing; actual, normal, and variation from...Ch. 4 - Job costing; variation on actual, normal, and...Ch. 4 - Proration of overhead. The Ride-On-Wave Company...Ch. 4 - Job costing, accounting for manufacturing...Ch. 4 - Service industry, job costing, law firm. Kidman ...Ch. 4 - Service industry, job costing, two direct- and two...Ch. 4 - Proration of overhead. (Z. Iqbal, adapted) The Zaf...Ch. 4 - Normal costing, overhead allocation, working...Ch. 4 - Proration of overhead with two indirect cost...Ch. 4 - General ledger relationships, under- and...Ch. 4 - Overview of general ledger relationships. Estevez...Ch. 4 - Allocation and proration of overhead. Resource...Ch. 4 - (2530 min.) Job costing, ethics. Joseph Underwood...Ch. 4 - Job costingservice industry. Market Pulse performs...
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