3.13, 3.14, Reexam 3.1 , 3.

Budgeted manufacturing overhead 7 000 000

Budgeted machine hours 200 000
Actual manufacturing overhead 6 800 000
Actual machine hours 195 000

1. Budgeted manufacturing overhead rate = 7 000 000 = 35

200 000
2. Allocation overhead = 195000*35 = 6825000

Manufacturing overhead allocated 6 825 000 – credit

Work in progress control 6 825 000 – debit

3. Work in progress control ………………………………………….6 825 000

Manuf. overhead control …………………………………………………6 800 000

Cogs ……………………………………………………………….25 000
Overallocation = increasing – we have to put cogs in credit
Underallocation – it is decreasing so we have tp put the cogs in debit
Since we have budgeted 68250000 and we have used 6 800 000 we have an overallocation of 25 000
25000/6800000 = 0.37% we have allocated more with 37% resources than we used.
3.14
1. Budgeted manufacturing overhead rate = 4800000/80000 = 60
2. 60*75 000 = 4 500 000
a) Over/under allocation = 4 900 000 – 4 500 000 = 400 000
Cost of goods 300 000 – debit
Manuf.overhead allocated 4 500 000 – debit
Manuf. Overhead control 4 800 000 – credit
b)
WIP 750 000 0.075 (7.5%) 225000 750000+22500 = 772500
Finished 1 250 000 0.125 37500 1250000+37500 =1287500
Goods (12.5%)
COGS 8 000 000 0.8 (80%) 240 000 8000000+24000 = 8240000
0
totals 10 000 000 100% 300 000 10300000

c) Doing it by the allocated costs means you have to calculate the allocated costs for each section
 WIP 360 000
Finished g 660 000
COGS 240 000
Totals 1 260 000

Proration based on machine hours as they are what drives the manufacturing overhead costs. Thus, it
would give the most fair and true view of the company.

Revenues Men - units Women -units Men - price Women - price

Revenues 1500 750 675 000
Conclusion:
1.. Cost pool = cost items grouped
Cost allocation - allocating indirect costs
Cost allocation base = a denominator for costs

3.13 Budgeted manufacturing overhead rate = budgeted value / budgeted hours

Allocated manufacturing overhead = budgeted rate * actual machine hours
Then to calculate the difference we need allocated manufacturing overhead – the actual overhead
And we divide this by the budgeted value to see how much difference we have

3.14 – rate = budgeted/budgeted

Allocated amount = budgeted rate * actual machine hours
Proration methods: method one – you do the same thing but you have to multiply the hour rate * the
hours worked for each account. That is what you get the percentages. If it gives you something with ,
you have to say that there might be some rounding errors since you know what the amount should be
Assignment 3.1:
- Sending the product out and maintaining the business - you have to put it n operating expense
and not in the indirect costs
- If it is shipping, that is related to the product and that means they are indirect costs.
- So anything we use to get the product home to customers is indirect costs and the rest are just
considered operating costs
- If you get a loss (negative number) you have to say that it does not make sense for it to be that
way.