1 Question 4 (10 marks) 4 The management for April Co. has a job costing system with two direct cost categories 5 (direct materials and direct manufacturing labour) and one manufacturing overhead cost pool, that is 6 allocated based on direct labour costs. 7 8 The annual budget for the plant is as follows: 9 Manufacturing overhead costs $250,000 10 Direct labour hours 30,000 hours 11 Direct labour costs $400,000 12 Machine hours 30,000 hours 13 14 REQUIRED: 15 16 a) Compute the traditional manufacturing overhead rate using this traditional system. (1 mark) 17 18 19 20 21 22 b) The actual information for the year is as follows: Manufacturing overhead costs Direct labour hours Direct labour costs Machine hour $270,000 31,000 hours $385,000 35.000 hours b) The actual information for the year is as follows: Manufacturing overhead costs Direct labour hours Direct labour costs Machine hours $270,000 31,000 hours $385,000 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 Styles 1 B D F G H J K M C 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 e), 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)