Account
Dec. 31, 2014
Account
Balance
(Before
Proration)
(1)
Allocated
Manuf.
Overhead in
Dec. 31, 2014
Balance
(Before
Proration)
(2)
Allocated Manuf.
Overhead in
Dec. 31, 2014
Balance as a
Percent of Total
(3) = (2) ÷ $114,000
Proration of $3,000
Underallocated
Manuf. Overhead
(4) = (3)
$3,000
Dec. 31, 2014
Account
Balance
(After
Proration)
(5) = (1) + (4)
WIP
$ 50,700
$ 10,260a
0.09
0.09
$3,000 = $ 270
$ 50,970
Finished Goods
245,050
29,640b
0.26
0.26
$3,000 = 780
245,830
Cost of Goods Sold
549,250
74,100c
0.65
0.65
$3,000 = 1,950
551,200
Total
$845,000
$114,000
1.00
$3,000
$848,000
a,b,c Overhead allocated = Direct manuf. labor cost
50% = $20,520; $59,280; $148,200
50%
4. Writing off all of the underallocated manufacturing overhead to Cost of Goods Sold (CGS) is
usually warranted when CGS is large relative to Work-in–Process and Finished Goods Inventory
and the underallocated manufacturing overhead is immaterial. Both these conditions apply in this
case. ROW should write off the $3,000 underallocated manufacturing overhead to Cost of Goods
Sold Account.
overhead rate
1. Budgeted manufacturing
=
Budgeted manufacturing overhead cost
Budgeted direct manufacturing labor cost
$125,000 50% of direct manufacturing labor cost
$250,000
==
4-31 (20−30 min) Job costing, accounting for manufacturing overhead, budgeted rates.
The Pisano Company uses a job–costing system at its Dover, Delaware, plant. The plant has a
machining department and a finishing department. Pisano uses normal costing with two direct-cost
categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost
pools (the machining department with machine- hours as the allocation base and the finishing
department with direct manufacturing labor costs as the allocation base). The 2014 budget for the
plant is as follows:
Machining Department
Finishing Department
Manufacturing overhead costs
$9,065,000
$8,181,000
Direct manufacturing labor costs
$ 970,000
$4,050,000
Direct manufacturing labor-hours
36,000
155,000
Machine-hours
185,000
37,000
Required:
1. Prepare an overview diagram of Pisano’s job-costing system.
2. What is the budgeted manufacturing overhead rate in the machining department? In the
finishing department?
3. During the month of January, the job-cost record for Job 431 shows the following:
Budgeted total costs in indirect cost pool
Budgeted indirect
Budgeted total costs in indirect cost pool
