Disposition of overhead over-allocation or under-allocation, two indirect cost pools. Glavine Corporation manufactures precision equipment made to order for the
Disposition of overhead over-allocation or under-allocation, two indirect cost pools. Glavine Corporation manufactures precision equipment made to order for the semiconductor industry. Glavine uses two manufacturing overhead cost pools€”one for the overhead costs incurred in its highly automated Machining Department and another for overhead costs incurred in its labour-based Assembly Department. Glavine uses a normal costing system. It allocates Machining Department overhead costs to jobs based on actual machine hours using a budgeted machine hour overhead rate. It allocates Assembly Department overhead costs to jobs based on actual direct manufacturing labour-hours using a budgeted direct manufacturing labour-hour rate.
The following data are for the year 2013:
Machine hours and direct manufacturing labour-hours and the ending balances (before proration of underallocated overhead) are as follows:
1. Compute the budgeted overhead rates for the year in the Machining and Assembly Departments.
2. Compute the under-allocated or over-allocated overhead in each department for the year. Dispose of the under-allocated or over-allocated amount in each department using:
a. Immediate write-off to Cost of Goods Sold.
b. Proration based on ending balances (before proration) in Cost of Goods Sold, Finished Goods, and Work-in-Process.
c. Proration based on the allocated overhead amount (before proration) in the ending balances of Cost of Goods Sold, Finished Goods, and Work-in-Process.
3. Which disposition method do you prefer in requirement 2? Explain.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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