Michael Scott books tours for new bands, and arranges to print T-shirts and produce demo CDs to sell on the tour. Scott's agency uses a normal costing system with two direct cost pools, labour and materials, and one indirect cost pool, general overhead. General overhead is allocated to each tour at 150% of labour cost. The following information relates to the agency for 2016:

1. As of June 1, there were tours in progress for two bands: Grunge Express and Different Strokes.

2. During June, both bands finished their tours.

3. New tours were started for three bands, As I Lay Dying, Ask Me Later, and Maybe Tomorrow. Of these bands, only Maybe Tomorrow finished its tour by the end of June. All costs incurred during the planning stage for a tour are gathered in a statement of financial position account called "Tours In Process (TIP)". When a tour is completed, the costs are transferred to a statement of comprehensive income account called "Cost of Completed Tours (CCT)."

The following cost information is for June:

Actual overhead in June was $2,500.
Required
1. Calculate the TIP for the end of June.
2. Calculate CCT for June.
3. Calculate under allocated or over allocated overhead at the end of June.
4. Calculate the ending balances in work-in-process and cost of goods sold if the under allocated or over allocated overhead amount is:
a. Written off to CCT.
b. Prorated using the ending balances (before proration) in TIP and CCT.
c. Prorated based on the overhead allocated in June in the ending balances of TIP and CCT (before proration).
5. Which of the methods in requirement 4 would you choose? Explain.

Transcribed Image Text:

From Beginning TIP Incurred in June Materials $400 300 Labour $600 400 Materials S 0 175 250 350 275 Labour $100 300 Grunge Express Different Strokes As I Lay Dying Ask Me Later Maybe Tomorrow 200