Swift Manufacturing Company uses a normal-costing system with a single manufactu

Question

Swift Manufacturing Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as the cost-allocation base. The overhead allocation rate used during the year was $100 per machine hour. At the end of the year the company had an over-allocated overhead cost totaling $500,000. Machine-hour data and the ending balances (before proration of under- or over-allocated overhead) are as follows: Actual End-of-Year Machine Hours Balance Cost of Goods Sold 80,000 $8,000,000 Finished Goods Inventory Control 15,000 1,250,000 Work in Process Inventory Control 5,000 750,000 The company prorates its under- or over-applied overhead to the Cost of Goods Sold, Finished Goods Inventory Control and Work-in-Process Control accounts on the basis of the amount of allocated overhead in each account. 1. After the proration, the end-of-year balance in the Finished Goods Inventory Control account was A) $1,325,000 B) $1,325,000 C) $840,000 D) $1,175,000 2. After the proration, the end-of-year balance in the Work in Process Inventory Control account was A) $725,000 B) $1,250,000 C) $775,000 D) $840,000

Explanation / Answer

Pro-rata allocation of over-applied overheads: Accounts Machine Hours used % as Total Over-applied Accounts Dbited with Overheads During the year Oh allocated Overheads decrease by Cost of Goods sold 80,000 80.00% 500,000 400000 Finished Goods inv. 15,000 15.00% 500,000 75000 WIP inventory 5,000 5.00% 500,000 25000 Total 100,000 Finished WIP Balance in Inventories before adjustment 1,250,000 750,000 Less: Share of over applied OH 75000 25,000 Net balance after adjustment 1,175,000 725,000 Year end balance in Finished Goods: D. $ 1175,000 Year end balance in WIP: A. $ 725,000

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.