General Ledger Relationships Under And Over Allocation

General ledger relationships, under- and over allocation. (S. Sridhar adapted) Needham Company uses normal costing in its job-costing system. Partially completed T-accounts and additional information for Needham for 2008 are as follows:

Additional Information:

a. Direct manufacturing labor wage rate was $15 per hour.

b. Manufacturing overhead was allocated at$20 per direct manufacturing labor-hour.

c. During the year, sales revenues were $1,090,000, and marketing and distribution costs were $140,000.

1. What was the amount of direct materials issued to production during 2008?

2. What was the amount of manufacturing overhead allocated to jobs during 2008?

3. What was the total cost of jobs completed during 2008?

4. What was the balance of work-in-process inventory on December 31, 2008?

5. What was the cost of goods sold before proration of under- or overallocated overhead?

5. What was the under- or overallocated manufacturing overhead in 2008?

7. Dispose of the under- overallocated manufacturing overhead using

a. Write-off to Cost of Goods Sold

b. Proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold

8. Using each of the approaches in requirement 7, calculate Needham’s operating income for 2008.

9. Which approach in requirement 7 do you recommend Needham use? Explain your answer briefly.

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