Happy Place Designs makes custom backyard play structures that it sells to dealers across the Midwest....

 

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Happy Place Designs makes custom backyard play structures that it sells to dealers across the Midwest. The play structures are produced in two departments, fabrication (a mostly automated department) and custom finishing (a mostly manual department). The company uses a normal-costing system in which overhead in the fabrication department is allocated to jobs on the basis of machine-hours and overhead in the finishing department is allocated to jobs based on direct manufacturing labour-hours. During May, Happy Place Designs reported actual overhead of $28,800 in the fabrication department and $45,300 in the finishing department. Additional information follows: View the additional information. Happy Place 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. Required Additional Information 1. Calculate the amount of overhead allocated in the fabrication department and the finishing department in May. 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 Happy Place Designs to change to this simpler method? Manufacturing overhead rate (fabrication department) Manufacturing overhead rate (finishing department) Machine-hours (fabrication department) for May Direct manuf. labour-hours (finishing department) for May Work-in-process inventory, May 31 Finished-goods inventory, May 31 Cost of goods sold, May $8 per machine-hour $21 per direct manufacturing labour-hour 3,100 machine-hours 2,000 labour-hours $97,500 $195,000 $357,500 Print Done Print Done Requirement 4. What would be the effect of writing off under- and overallocated overhead to cost of goods sold? Would it be reasonable for Happy Place Designs to change to this simpler method? (Enter percentage values rounded to the nearest tenth percent, X.X%.) If the write-off approach is used, what is the ending balance in Cost of Goods Sold? What is the percentage increase (decrease) in Cost of Goods Sold? Happy Place Designs makes custom backyard play structures that it sells to dealers across the Midwest. The play structures are produced in two departments, fabrication (a mostly automated department) and custom finishing (a mostly manual department). The company uses a normal-costing system in which overhead in the fabrication department is allocated to jobs on the basis of machine-hours and overhead in the finishing department is allocated to jobs based on direct manufacturing labour-hours. During May, Happy Place Designs reported actual overhead of $28,800 in the fabrication department and $45,300 in the finishing department. Additional information follows: View the additional information. Happy Place 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. Required Additional Information 1. Calculate the amount of overhead allocated in the fabrication department and the finishing department in May. 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 Happy Place Designs to change to this simpler method? Manufacturing overhead rate (fabrication department) Manufacturing overhead rate (finishing department) Machine-hours (fabrication department) for May Direct manuf. labour-hours (finishing department) for May Work-in-process inventory, May 31 Finished-goods inventory, May 31 Cost of goods sold, May $8 per machine-hour $21 per direct manufacturing labour-hour 3,100 machine-hours 2,000 labour-hours $97,500 $195,000 $357,500 Print Done Print Done Requirement 4. What would be the effect of writing off under- and overallocated overhead to cost of goods sold? Would it be reasonable for Happy Place Designs to change to this simpler method? (Enter percentage values rounded to the nearest tenth percent, X.X%.) If the write-off approach is used, what is the ending balance in Cost of Goods Sold? What is the percentage increase (decrease) in Cost of Goods Sold?

Answer rating: 100% (QA)

Happy Place Designs Overhead Allocation and Proration 1 Overhead Allocated Fabrication Dept Machinehours Rate 3100 hours 8hour 24800 Finishing Dept Di... View the full answer