Ti-Enne Srl uses a normal costing system with a single manufacturing overhead cost pool and machine-hours as

Question:

Ti-Enne Srl uses a normal costing system with a single manufacturing overhead cost pool and machine-hours as the allocation base. The following data are for 2007:

Budgeted manufacturing overhead........................ €4800000

Overhead allocation base.................................... Machine-hours

Budgeted machine-hours.................................... 80000

Manufacturing overhead incurred.......................... €4900000

Actual machine-hours........................................ 75000

Machine-hours data and the closing balances (before proration of under allocated or over allocated overhead) are as follows:

Ti-Enne Srl uses a normal costing system with a single

Required
1. Calculate the budgeted manufacturing overhead rate for 2007.
2. Calculate the under- or over allocated manufacturing overhead of Ti-Enne in 2007.
Prorate this under- or over allocated amount using:
a. Immediate write-off to Cost of Goods Sold
b. Proration based on closing balances (before proration) in Work in Progress, Finished Goods and Cost of Goods Sold
c. Proration based on the allocated overhead amount (before proration) in the closing balances of Work in Progress, Finished Goods and Cost of Goods Sold.
3. Which proration method do you prefer in requirement 3? Explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Management and Cost Accounting

ISBN: 978-1405888202

4th edition

Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster

Question Posted: