Allocation and proration of overhead. Tandem Inc prints custom marketing materials. The business was started January 1,2010. The company uses normal costing system. It has two direct costs pools, materials and labor and one indirect cost pool, overhead. Overhead is charged to printing jobs on the basis of direct labor costs. The following information is available for 2010
Budgeted direct labor. $150,000
Budgeted overhead costs. $180,000
Costs of actual materials used $126,500
Actual direct labor costs. $148,750
Actual overhead cots. $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:
Direct materials. Direct labor
Job 11. $3,620 $4,500
Job 12. $6,830. $7,250
Tamden inc has no finished goods inventories because all the printing jobs are transferred to cost of goods sold when completed
1. Compute the overhead allocation rate
2. Calculate the balance in ending work in process and costs of goods sold before any adjustments for under or over allocated overhead
3. Calculate under or over allocated overhead
4 calculate the ending balance in work in process and cost of goods sold if the under or over allocated overhead amount is as follows:
A. Written off to COGS
B. prorated using ending balance (before proration) in COGS and work in process control accounts.
5. Which methods in requirement 4 would you choose? Explain
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