Job costing—service industry. Cam Cody schedules book signings for science fiction authors and creates e-books and books on CD to sell at each signing. Cody uses a normal-costing system with two direct cost pools, labor and materials, and one indirect cost pool, general overhead. General overhead is allocated to each signing based on 80% of labor cost. Actual overhead equaled allocated overhead in March 2010. Actual overhead in April was $1,980. All costs incurred during the planning stage for a signing and during the signing are gathered in a balance sheet account called “Signings in Progress (SIP).” When a signing is completed, the costs are transferred to an income statement account called “Cost of Completed Signings (CCS).” Following is cost information for April 2010:
From Beginning SIP
Incurred in April
The following information relates to April 2010.
As of April 1, there were three signings in progress, N. Asher, T. Bucknell, and S. Brown. Signings for
S. King and D. Sherman were started during April. The signings for T. Bucknell and S. King were completed during April.
1. Calculate SIP at the end of April. Required
2. Calculate CCS for April.
3. Calculate under/overallocated overhead at the end of April.
4. Calculate the ending balances in SIP and CCS if the under/overallocated overhead amount is as follows:
a. Written off to CCS
b. Prorated based on the ending balances (before proration) in SIP and CCS
c. Prorated based on the overhead allocated in April in the ending balances of SIP and CCS (before proration)
5. Which of the methods in requirement 4 would you choose?