The management for April Co. has a job costing system with two direct cost categories

(direct materials and direct manufacturing labour) and one manufacturing overhead cost pool, that is

allocated based on direct labour costs.

The annual budget for the plant is as follows:

Manufacturing overhead costs $250,000

Direct labour hours 30,000 hours

Direct labour costs $400,000

Machine hours 30,000 hours

a) Compute the traditional manufacturing overhead rate using this traditional system. (1 mark)

b) The actual information for the year is as follows:

Manufacturing overhead costs $270,000

Direct labour hours 31,000 hours

Direct labour costs $385,000

Machine hours 35,000 hours

Based on the allocation method used by April Co., record the journal entry for the

Manufacturing overhead allocated in the space below.(2 marks)

Account Name Debit Credit

c) Management follows the write-off method to dispose of any over or under-allocated

manufacturing overhead.Record the journal entry based on the write-off method in the space below. (3 marks)

Year end balances (before

proration)

Cost of Goods sold $300,000

Finished Goods $150,000

WIP Control $65,000

Account Name Debit Credit

d) Management is considering using other allocation methods. Using the balances in c), allocate the over/under allocated overhead using the proration method and prepare the journal entry to record the allocation. (3 marks)

Account Name Debit Credit

e) Considering your results in c) and d) above, specify which of these two methods would you recommend to management, and explain why. (1 mark)

Answer rating: 100% (QA)

a The traditional manufacturing overhead rate using the traditional system would be computed by dividing the manufacturing overhead costs by the base ... View the full answer