Solved: Allocation and proration of overhead Tamden Inc

prints custo
Allocation and proration of overhead Tamden Inc prints custo

Allocation and proration of overhead. Tamden, Inc., prints custom marketing materials. The
business was started January 1, 2010. The company uses a normal-costing system. It has two
direct cost pools, materials and labor and one indirect cost pool, overhead. Overhead is
charged to printing jobs on the basis of direct labor cost. The following information is available
for 2010.
Budgeted direct labor costs $150,000
Budgeted overhead costs $180,000
Costs of actual material used $126,500
Actual direct labor costs $148,750
Actual overhead costs $176,000
There were two jobs in process on December 31, 2010: Job 11 and Job 12. Costs added to
each job as of December 31 are as follows:

Tamden, Inc., has no finished goods inventories because all printing jobs are transferred to cost
of goods sold when completed.
Required
1. Compute the overhead allocation rate.
2. Calculate the balance in ending work in process and cost of goods sold before any
adjustments for under- or overallocated overhead.
3. Calculate under- or overallocated overhead.
4. Calculate the ending balances in work in process and cost of goods sold if the under- or
overallocated overhead amount is as follows:
a. Written off to cost of goods sold
b. Prorated using the ending balance (before proration) in cost of goods sold and work-in-
process control accounts
5. Which of the methods in requirement 4 would you choose? Explain.Tamden, Inc., has no
finished goods inventories because all printing jobs are transferred to cost of goods sold
whencompleted.

Allocation and proration of overhead Tamden Inc prints custo

ANSWER
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