ACCT 327 TAKE-HOME QUIZ 1 (16S)
The Wham Company uses normal costing in its job-order costing system. At the beginning of 2015, the company had only one job in its Work in Process Control account. That was Job 444, which had a balance of $7,000 as of the end of 2014. The $7,000 was made up of $4,200 for direct materials, $1,000 for direct labor, and $1,800 for overhead. The company charges overhead to jobs on the basis of direct labor cost. For 2015, the estimated direct labor cost is $48,000 and the estimated overhead cost for 2015 is $96,000. The beginning balance for 2015 in Finished Goods Control consisted of 400 units of Job 411 that had a cost of $8 each. The $8 was made up of $2.40 for direct materials, $2 for direct labor, and $3.60 for overhead. There were only three jobs worked on during 2015. The direct costs that were charged to these jobs during 2015 were as follows:
Job 444 Job 555 Job 777
Direct Materials cost $10,000 $22,000 $30,000
Direct Labor cost $12,000 $18,000 $20,000
Actual overhead for 2015 was $106,000. Jobs 444 and 555 were completed during 2015. Job 444 consisted of 10,000 units and Job 555 consisted of 5,000 units. Sales for 2015included all 400 units from Job 411, all 10,000 units from Job 444, and 3,000 units from Job 555.
1 Compute the amount of underallocated oroverallocated overhead for 2015.
2.For 2015, prorate the under (over)allocated overhead to the appropriate accounts using the total ending balances in these accounts. This is Method 2 that I talked about in class. If needed, round percentages to the nearest tenth of a percent, and round allocations to the nearest dollar. After this proration, show the adjusted amount of total overhead in each account.
3.Re-do question two, but now prorate the under (over) allocated overhead using the most theoretically correct method. This is Method 3 that I talked about in class. If needed, round percentages to the nearest tenth of a percent, and round allocations to the nearest dollar. After this proration, show the adjusted amount of total overhead in each account.
4.Now assume that the company is using actual costing based on a year’s time period, and still uses direct labor cost as the base. Compute the actual overhead rate for 2015. Using actual costing, show how much overhead would have been charged to Job 777 during 2015.
5.Does your adjusted amount of overhead in question 3 equal your actual overhead charged to Job 777 in question 4? Should they be equal?
Please remember that these take-home quizzes are open book and open notes, but NOT open neighbor. Please do your own work. If you need a little help getting started, come see me.