Question: Jordan Brady schedules gigs for local bands and creates CDs

Jordan Brady schedules gigs for local bands and creates CDs and T-shirts to sell at each gig. Brady uses a normal-costing system with two direct-cost pools, labor and materials, and one indirect-cost pool, general overhead. General overhead is allocated to each gig based on 120% of direct labor cost. Actual overhead equaled allocated overhead as of March 2014. Actual overhead in April was $ 1,980. All costs incurred during the planning stage for a gig and during the gig are gathered in a balance sheet account called “Gigs in Progress (GIP).” When a gig is completed, the costs are transferred to an income statement account called “Cost of Completed Gigs (CCG).” Following is cost information for April 2014:

As of April 1, there were three gigs in progress: Irok, Freke Out, and Bottom Rung. The gigs for Dish Towel and Rail Ride were started during April. The gigs for Freke Out and Dish Towel were completed during April.

1. Calculate GIP at the end of April.
2. Calculate CCG for April.
3. Calculate under-or overallocated overhead at the end of April.
4. Calculate the ending balances in GIP and CCG if the under-or overallocated overhead amount is as follows:
a. Written off to CCG
b. Prorated based on the ending balances (before proration) in GIP and CCG
c. Prorated based on the overhead allocated in April in the ending balances of GIP and CCG (before proration)
5. Which method would you choose? Explain. Would your choice depend on whether overhead cost is underallocated or overallocated?Explain.

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  • CreatedMay 14, 2014
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