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Chapter 17: Q. 13RQ (page 938)

What is an allocation base? Give some examples

Short Answer

Expert verified

The allocation base is the denominator that links the overhead costs to the products. Ideally, the allocation base is the primary cost driver of manufacturing overhead. Direct labor hours, machine hours, direct labor cost are the examples of the allocation base.

Step by step solution

01

Machine hours

Machine hours is a measurement used to apply the overheads to the manufactured goods of the company. It is the method of absorption of the overheads incurred by the company.

02

Allocation base

Allocation base is define as the denominator used while computing the predetermined overhead allocation rate. It divides the total overhead cost on per unit basis. Machine hours, labor hours can be used as the allocation base.

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Most popular questions from this chapter

Question: The following information pertains to Smith Company, which you worked with previously in this chapter:

11. Smith Company completed jobs that cost \(25,000 to manufacture. Record the journal entry.

12. Smith Company sold jobs to customers on account for \)52,000 that cost $22,000 to manufacture. Record the journal entries.

Question: Match the following terms to their definitions.

a. A record used to assign direct labor cost to specific jobs. 1. Job

b. A document that requests the transfer of materials to 2. Job cost order

the production floor.

c. A document that shows the direct materials, direct labor, 3. Job order costing

and manufacturing overhead costs for an individual job.

d. An accounting system that accumulates costs by process. 4. Labor time record

e. The production of a unique product or specialized service 5. Material requisition

f. Used by companies that manufacture unique products or 6. Process costing system

provide specialized services

Question: What types of companies use job order costing systems?

The manufacturing records for Sporty Kayaks at the end of the 2018 fiscal year show the following information about manufacturing overhead:

Overhead allocated to production

\(409,200

Actual manufacturing overhead cost

432,000

Predetermined overhead allocation rate

\)44 per machine hours

Requirements

3. Prepare the journal entry to adjust for the underallocated or overallocated manufacturing overhead.

Analyze the following T-accounts to determine the amount of direct and indirectmaterials used.

Raw material inventory

Work in process inventory
See all solutions

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