Arensky Company uses normal costing to account for overhead inits job costing system. There are 2 departments in the company:Designing and Machining. The Designing Dept. is labor intensive;the Machining Dept. is machine intensive. (OH= Overhead; DLH=Direct Labor Hours; MH= Machine Hours.) The budget for 2019 is asfollows:
Designing Machining
Est. OH $2,000,000 $5,600,000
Est DLH 40,000 Hours 10,000 Hours
Est MH. 20,000 Hours 70,000 Hours
Actual Results are as follows:
Designing Machining
Actual OH $2,100,000 $5,650,000
Actual DLH 41,500 Hours 11,000 Hours
Actual MH 19,800 Hours 72,000 Hours
A. Using the most logical allocation base, Calculate the OHAllocation rate for each department. Be sure to state your finalanswer in proper units.
B. For Each Department, Calculate How much OH is Allocated
C. For Each Department, Give the journal entry to record-over orunder-allocated overhead
D. Why is Normal Costing Method preferred to the Actual CostingMethod.
