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Allocation of overhead

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Igh grade. The standard CDs are used primarily in computer drives and are designed for data storage rather than accurate sound reproduction. The company only recently began producing the higher quality, high grade model to enter the lucrative music recording market. Since the new product was introduced, profits have seen only a modest increase. Management expected a significant profit increase related to rapidly growing sales of the high grade discs. Management believes the accounting system may not be accurately allocating costs to products.
Investigating the cost allocation problem manufacturing overhead is currently assigned to products based on the direct labor costs in the products. Last year's manufacturing overhead was $880,000, based on the production of 320,000 standard CDs and 120,000 high grade CDs. Selling prices last year averaged $3.60 per standard disc and $5.80 per high disc. Direct labor and direct material costs for last year are Please see the attachment.

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High grade. The standard CDs are used primarily in computer drives and are designed for data storage rather than accurate sound reproduction. The company only recently began producing the higher quality, high grade model to enter the lucrative music recording market. Since the new product was introduced, profits have seen only a modest increase. Management expected a significant profit increase related to rapidly growing sales of the high grade discs. Management believes the accounting system may not be accurately allocating costs to products.
Investigating the cost allocation problem manufacturing overhead is currently ...

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Response provides steps to compute the steps to allocate overhead

$2.19
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Management accounting: overhead allocation rate; overhead cost; and journal entries

The predetrmiend overhead allocation rate for Forsythe, Inc. is based on estimated $250,000 for direct materials; 410,000 for direct labor; 55,000 for Indirect materials; 125,000 for Indirect labor; 50,000 for sales commission; 170,000 for Factory depreciation; 15,000 for factory property taxes; 35,000 for Factory utilities; 62,5000 for Advertising; and $100,000 for rental of factory equipment. Calculate the predetermined overhead rate allocation rate. Calculate the overhead cost applied during the year. Determine the amount of over- or underapplied overhead. What are the journal entries to eliminate the over -or underapplied overhead assuming that it is not material in amount.

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