Nama : Muhammad Ivan Abubekar 023001701040

Nama : Fulgensius F D Watu 023001701165

Direct Material Control
1/1/2014 $ 25,000.00
$ 240,000.00
P.4-37 12/31/2014 $ 31,000.00

Work-in Process Control

1/1/2014 $ 44,000.00 Trasfered to Finish
direct manufact. Goods
labor $ 348,000.00
Direct material $ 234,000.00
Manuf. Overhead
Allocated $ 464,000.00
12/31/2014 $ 165,000.00

Finished Goods Control

1/1/2014 $ 10,000.00
Transferred in
From WIP $ 925,000.00
12/31/2014 $ 55,000.00

Manufacturing Overhead Control

Manufacturing
overhead
Cost $ 514,000.00

Manufacturng Overhead Allocated

Manufacuring
overhead allocated
to WIP

Cost of Good Sold

Finishied Goods
Sold $ 880,000.00
ntrol
$ 234,000.00 1
From Direct Materials Control T-account, Direct materials issued to production =

2
Direct manufacturing labor-hours

Manufacturing overhead allocated

ntrol 3 From the debit entry to Finished Goods T-account,

Cost of jobs completed and transferred from WIP
$ 925,000.00 4 From Work-in-Process T-account,Work in process inventory on 12/31/2014

5 From the credit entry to Finished Goods Control T-account, Cost of goods sold
(before proration)
6
Manufacturing overhead underallocated

ntrol
$ 880,000.00
7
a ).
Write-off to Cost of Goods Sold will increase (debit) Cost of Goods Sold by $50,000. H

b ).
Proration based on ending balances (before proration) in Work in Process, Finished G

d Control

Account (1)

Work in Process
Finished Goods
Allocated Cost of Goods Sold

ad allocated
$ 464,000.00 8
Revenues
Cost of goods sold
d Gross margin
Marketing and distributioncost
Operating income/(loss)

9 If the purpose is to report the most accurate inventory and cost of goods sold figures
inventory and cost of goods sold accounts. Proration based on the balances in Work i
overhead allocated component if the proportions of direct costs to manufacturing ov
this is not the case, the prorations based on Work in Process, Finished Goods, and Co
to Cost of Goods Sold method.
Another consideration in Needham’s decision about how to dispose of underallocate
will lead to an operating loss. Proration based on the balances in Work in Process, Fin
The main merit of the write-off to Cost of Goods Sold method is its simplicity. Howev
als Control T-account, Direct materials issued to production = $234,000 that appears as a credit
Direct manufacturing labor costs
ng labor-hours =
Direct manufacturing wage rate per hour

rhead allocated = Direct manufacturing labor hours × Manufacturing overhe

ry to Finished Goods T-account,

= $925,000
eted and transferred from WIP
ess T-account,Work in process inventory on 12/31/2014 $44,000 + $234,000 + $348,000
=

ry to Finished Goods Control T-account, Cost of goods sold

= $880,000
(before proration)

Manufacturing overhead underallocated = Debits to Manufacturing Overhea

= $514,000 – $464,000

= $50,000 underallocated

Goods Sold will increase (debit) Cost of Goods Sold by $50,000. Hence, Cost of Goods Sold = $880,000 + $50,000 = $930,000.

ending balances (before proration) in Work in Process, Finished Goods, and Cost of Goods Sold.

Account Balance (Before Proration) (2) Proration of $50,000 Underallocated Manufacturing Overh
$ 165,000 (15%) 0.15 × $50,000 = $ 7,500
55,000 ( 5%) 0.05 × $50,000 = 2,500
880,000 (80%)
1100.000 (100%) $

Write-off to Cost of Goods Sold Proration Based on Ending Balances

$1,050,000 $1,050,000
930,000 920,000
120,000 130,000
125,000 125,000
($5,000) $ 5,000

report the most accurate inventory and cost of goods sold figures, the preferred method is to prorate based on the manufacturing overhea
 of goods sold accounts. Proration based on the balances in Work in Process, Finished Goods, and Cost of Goods Sold will equal the proratio
component if the proportions of direct costs to manufacturing overhead costs are constant in the Work in Process, Finished Goods, and Co
the prorations based on Work in Process, Finished Goods, and Cost of Goods Sold will better approximate the results if actual cost rates ha
old method.
tion in Needham’s decision about how to dispose of underallocated manufacturing overhead is the effects on operating income. The write-
ating loss. Proration based on the balances in Work in Process, Finished Goods, and Cost of Goods Sold will help Needham avoid the loss a
he write-off to Cost of Goods Sold method is its simplicity. However, accuracy and the effect on operating income favor the preferred and r
 $ 348,000
= = 29,000 hours
$ 12 / hours

s × Manufacturing overhead rate = 29,000 hours × $16 per hour = $464,000

00 + $234,000 + $348,000 + $464,000 –$925,000 = $165,000

to Manufacturing Overhead Control – Credit to Manufacturing Overhead Allocated

00 = $930,000.

ated Manufacturing Overhead (3) Account Balance (After Proration) (4) = (2) + (3)

000 = $ 7,500
000 = 2,500 57500
$920,000
50,000 $ 1,150,000.00

he manufacturing overhead allocated component in the

Sold will equal the proration based on the manufacturing
ess, Finished Goods, and Cost of Goods Sold accounts. Even if
esults if actual cost rates had been used rather than the write-off

erating income. The write-off to Cost of Goods Sold

Needham avoid the loss and show an operating income.
e favor the preferred and recommended proration approach.