ACC512

Tim Richardson Horngren q5-29. My answer.

1.

Overhead rate: $252000/$420000 = 60%

WIP ending balance:

	Dir Labor	Dir Mtl	Overhead	Total
Job 1768B	11000	22000	6600	39600
Job 1819C	39000	42000	23400	104400
TOTAL			30000	144000

Ending WIP: $144,000 (Overhead $30000)

FinGoods: Ending: $156,000 (overhead $24,000)

COGS

Total direct labor	$400000
less FinGoods	$40000
less WIP	$50000
	$310000
overhead (60%)	$186000

COGS ending balance: $1,600,000 (overhead $186,000)

Part 2

Allocated overhead: $400000 * 0.6 = $240,000
actual overhead: $186,840
over applied by $53,160

Part 3

3a. Prorate on ending balances

	End Bal	Share %	Share $
WIP	144000	7.58	4029
FinGoods	156000	8.21	4365
COGS	1600000	84.21	44766
	1900000

Journal entries
Manufacturing Overhead Applied       $240,000
        Manuf. Overhd Ctl                      $186,840
        WIP                                    $ 4,029
        Fingoods                               $ 4,365
        COGS                                   $ 44,766

3b
Prorate on allocation

	End Bal (overhead compt)	Share %	Share $
WIP	30000	12.5	6645
FinGoods	24000	10	5316
COGS	186000	77.5	41199
	240000

4 operating income effect

COGS write-off: income increases by $53160
(assume no change in sales revenue due to lower costs: the cost-plus pricing must be based on budgeted costs, unless the company issues a rebate to its customers)

3a sees income increase by $44766, 3b sees income increase by $41199

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Tim Richardson ...
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