Analyze Manufacturing Overhead (Learning Objectives 3 & 5) Annabelle\'s Uniforms

Question

Analyze Manufacturing Overhead (Learning Objectives 3 & 5) Annabelle's Uniforms produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Annabel's Uniforms reports the following cost data for the past year: Requirements Compute the predetermined manufacturing overhead rate. Calculate the allocated manufacturing overhead for the past year. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed of? How can managers use accounting information to help control manufacturing overhead costs? Use job costing at an advertising agency (Learning Objectives 3, 4, & 7) Walker & Janosko is an Internet advertising agency. The firm uses a job cost system in which each client is a different "job." Walker & Janosko traces direct labor, software licensing costs, and travel costs directly to each job (client). The company allocates indirect costs to jobs based on a predetermined indirect cost allocation rate computed as a percentage of direct labor costs. At the beginning of the current year, managing partner Laurie Walker prepared a budget:

Explanation / Answer

Solution:1

Predetermined manufacturing overhead rate = Estimated manufacturing overhead/Estimated total machine hours

Estimated manufacturing overhead = 49000 + 65500 + 28300 + 43500 = 186300

Predetermined manufacturing overhead rate = 186300/6900 = 27 hours per unit

Solution:2

Allocated manufacturing overhead = Actual machine houre * budgedted OH rate

= 6900*27 = 186300

Solution:3

Actual manufacturing OH = 53500+67000+46500+29300=196300

Over/under allocated OH manufacturing overhead = Allocated OH- actual OH = 186300-196300 = 10000 under allocated manufacturing overhead. This cost can be disposed of by writing it of in the COGS.

Solution:4

Managers can use the accounting information to control the manufacturing cost in order to writing of the underallocated manufacturing overhead or adjusting the overallocated manufacturing overhead.

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