Question

6. Moira Company has just finished its first year of operations and must decide which method to use for adjusting cost of goods sold. Because the company used a budgeted indirect-cost rate for its manufacturing operations, the amount that was allocated (5135,000) to cost of goods sold was different from the actual amount incurred ($425,000). Ending balances in the relevant accounts were: Work-in-Process Finished Goods Cost of Goods Sold $ 40,000 80,000 680,000 Required: (8 points) a. Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances. Be sure your journal entry closes the related overhead accounts.

Answer 1

Solution: Credit Debit 10000 Account title Manufacturing overhead Work in process Finished goods cost of goods sold 500 1000 8500 / Wokring: Overhead applied Actual overhead Overapplied overhead 435000 425000 10000 Work in process Finished goods cost of goods sold Total Ending bal. % of total Overapplied overhead b=a/800000 c=b*10000 40000 5.00% 500 80000 10.00% 1000 680000 85.00% 8500 800000 10000