Question

The following information relates to the activities of King Ltd. for the year 2013:
Advertising Costs ........... $ 62,500
Beginning Work-in-Process ......... $ 34,000
Direct Labour ............... 320,000
Beginning Direct Materials ........ 52,000
Indirect Labour ........... 61,400
Factory Amortization ........... 162,000
Factory Equipment Maintenance ..... 13,300
Ending Work-in-Process ......... 45,000
Ending Direct Materials ......... 42,500
Factory Utilities ........... 26,000
Office Amortization ........... 13,000
Sales Commissions ........... 24,000
Purchases of Direct Materials ........ 156,000
Corporate Salaries ........... 289,000
Factory Supplies ........... 4,400
Insurance on Factory ........... 22,600
The company uses normal costing and applies overhead on the basis of machine hours (MH). The company had calculated its overhead rate to be $4.25 per MH on the basis of 60,000 budgeted MH. Actual MH worked in the plant were 63,200.
REQUIRED
1. Compute the amount of overallocated or underallocated overhead for the year.
2. Prepare the journal entry to record the disposition of the amount of overallocated or underallocated overhead assuming the company writes off the difference to Cost of Goods Sold.
3. Identify and briefly outline an alternative treatment (from requirement 2) for disposing of overallocated or underallocated overhead.
4. Prepare a Schedule of Cost of Goods Manufactured for the year.
5. Briefly explain the differences between actual and normal costing, and state how the Schedule of Cost of Goods Manufactured would differ under actual costing.


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  • CreatedJuly 31, 2015
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