Question

Southern Rim Parts estimates its manufacturing overhead to be $374,500 and its direct labor costs to be $1,070,000 for year 1. The first three jobs that Southern Rim worked on had actual direct labor costs of $66,000 for Job 301, $91,000 for Job 302, and $180,000 for Job 303. For the year, actual manufacturing overhead was $394,000 and total direct labor cost was $833,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs using predetermined rates. Overhead applied in each of the inventory accounts is as follows: $ Work-in-process inventory Finished goods inventory Cost of goods sold 29, 155 87,465 174,930 Required: Prepare an entry to prorate the under- or overapplied overhead. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Journal Entry:

No.	Tra	Account Name	Debit	Credit
A	1	Applied manufacturing overhead	$291,550
		Work-in-process inventory ($102,450 ×10%)	$10,245
		Finished Goods Inventory ( $ 102,450 × 30%)	$30,735
		Cost of good sold ( $ 102,450 × 60%)	$61,470
		To Manufacturing overhead control		$394,000

Explanation:

1) Applied Manufacturing Overhead:

= $ 29,155 + 87,465 + 174,930

= $ 291,550

2) Percentage:

WIP Inventory. ( $29,155 ÷ 291,550)	10%
Finished goods inventory ( $87,465 ÷ 291,550)	30%
Cost of good sold ( $174,930 ÷ 291,550)	60%
Total	100%

3) Actual Overhead $ 394,000 ( given)

4)

Actual Overhead	$394,000
Applied Overhead	$291,550
Under Applied Overhead	$102,450