Question

Disposition of overhead over-allocation or under-allocation, two indirect cost pools. Glavine Corporation manufactures precision equipment made to order for the semiconductor industry. Glavine uses two manufacturing overhead cost pools—one for the overhead costs incurred in its highly automated Machining Department and another for overhead costs incurred in its labour-based Assembly Department. Glavine uses a normal costing system. It allocates Machining Department overhead costs to jobs based on actual machine hours using a budgeted machine hour overhead rate. It allocates Assembly Department overhead costs to jobs based on actual direct manufacturing labour-hours using a budgeted direct manufacturing labour-hour rate.
The following data are for the year 2013:
Machine hours and direct manufacturing labour-hours and the ending balances (before proration of underallocated overhead) are as follows:
REQUIRED
1. Compute the budgeted overhead rates for the year in the Machining and Assembly Departments.
2. Compute the under-allocated or over-allocated overhead in each department for the year. Dispose of the under-allocated or over-allocated amount in each department using:
a. Immediate write-off to Cost of Goods Sold.
b. Proration based on ending balances (before proration) in Cost of Goods Sold, Finished Goods, and Work-in-Process.
c. Proration based on the allocated overhead amount (before proration) in the ending balances of Cost of Goods Sold, Finished Goods, and Work-in-Process.
3. Which disposition method do you prefer in requirement 2? Explain.


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  • CreatedJuly 31, 2015
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