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Manufacturing overhead allocation

-The Company has adopted a normal costing approach with manufacturing overhead costs allocated based on direct labour hours

Revise below report so the normal costing approach adopted by the company is properly reflected.

Additional Information

The company's chocolate bar "The-Bar," is 85% cocoa.

The company's processing plant consists of two divisions: The cocoa bean and The chocolate bar

The two divisions are separate.

The two divisions operate on the same premises.

A.The cocoa bean division. Purchases the raw cocoa beans and ferments and roasts them. The products and by-products that cannot be used in the chocolate bar division are packaged and sold to customers for a variety of other final products.

B.The chocolate bar division. All products follow the same mixing procedure and some products have an additional step of adding particulates such as almonds or salt granules.

Currently produces 1.6 million chocolate bars per year( 80% of its practical capacity)

Practical capacity is 12,000 direct labour hours or about 2 million bars per year.

Products:

1.The-Bar.

2.Alamonde (The-Bar with almonds)

(It takes about the same amount of effort and resources to produce The-Bar and Alamonde, the costs of direct labour, basic ingredients, and manufacturing overhead are averaged over all batches.)

Ingredients are added at the beginning of each operation.

Direct labour costs and overhead are added evenly throughout the process based on direct labour hours.

3.Salt-Lick (The-Bar with pieces of pink Himalayan salt) produced as a special order and no inventory is kept on hand, and costs are assigned to a distinct batch using a job costing system.

In order to properly analyze the financial statements, the following information is also provided: Exhibit 3 Actual cost of product manufactured For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Total Direct ingredients used $ 333,507 $ 232,724 $ 129,948 $ 696,179 Direct labour 135,876 123,926 70,338 330,140 Manufacturing overhead 476,954 367.795 247,901 1,092,650 Total manufacturing costs $ 946,337 $ 724,445 $ 448, 187 $ 2,118,969 Add: beginning work-in-process 1,196 837 2,033 Deduct: ending work-in-process (1,207) (815) (2,022) Cost of goods manufactured $ 946.326 $ 724.467 $ 448,187 $ 2.118,980 Budgeted cost of product manufactured For the year ended December 31, 20X7 The-Bar Alamonde Salt-Lick Total Direct ingredients used $ 330,271 $ 231,514 $ 128,694 $ 690,479 Direct labour 147,744 101,736 57,996 307,476 Manufacturing overhead 518.685 357,165 203,607 1,079,457 Total manufacturing costs $ 996,700 $ 690,415 $ 390,297 $ 2,077,412 Add: beginning work-in-process 2,991 2,094 5,085 Deduct: ending work-in-process (2.885) (1,949) (4.834) Cost of good manufactured $ 996,806 $ 690,560 $ 390,297 $ 2,077.663