Answer:
Budgeted Overhead Cost 266,000
Budgeted Labor Cost 190,000
Recovery rate =266000/190000
Recovery rate per labor cost 1.40
Actual Material 158,000
Actual labor 175,000
WIP closing Material Labor
Job 11 4,720 5,700
Job 12 5,090 6,900
Total 9,810 12,600
Transfer to Finished= Total-WIP
Actual Material 148,190
Actual labor 162,400
Category Finished WIP Total
Material 148,190 9,810 158,000
Labor 162,400 12,600 175,000
Overhead-Recovered 227,360 17,640 245,000
@ 140% of labor
Balance before 537,950 40,050 578,000
adjustment to overhead
under-allocation
Option 1-Underallocated 2,200 2,200
overhead (247200-245000)
Balance after adjusting 540,150 40,050 580,200
overhead under-allocation
Option 2-Underallocated 2,042 158 2,200
overhead in overhead allocated rate
2200*227360/245000
2200*17640/245000
Balance before adjustment 537,950 40,050 578,000
to overhead under-allocation
Balance after adjusting 539,992 40,208 580,200
overhead under-allocation
g. the option 2 will be chosen because a careful look at the underallocated overhead is similar to 2017 so the charge should be levied on all activity
Explanation:
Budgeted Overhead Cost 266,000
Budgeted Labor Cost 190,000
Recovery rate =266000/190000
Recovery rate per labor cost 1.40
Actual Material 158,000
Actual labor 175,000
WIP closing Material Labor
Job 11 4,720 5,700
Job 12 5,090 6,900
Total 9,810 12,600
Transfer to Finished= Total-WIP
Actual Material 148,190
Actual labor 162,400
Category Finished WIP Total
Material 148,190 9,810 158,000
Labor 162,400 12,600 175,000
Overhead-Recovered 227,360 17,640 245,000
@ 140% of labor
Balance before 537,950 40,050 578,000
adjustment to overhead
under-allocation
Option 1-Underallocated 2,200 2,200
overhead (247200-245000)
Balance after adjusting 540,150 40,050 580,200
overhead under-allocation
Option 2-Underallocated 2,042 158 2,200
overhead in overhead allocated rate
2200*227360/245000
2200*17640/245000
Balance before adjustment 537,950 40,050 578,000
to overhead under-allocation
Balance after adjusting 539,992 40,208 580,200
overhead under-allocation
g. the option 2 will be chosen because a careful look at the underallocated overhead is similar to 2017 so the charge should be levied on all activity