Question

doing the journal entries letter H... "manufacturing overhead cost was applied to jobs"i understand how to get the applied MOH amount however, i dont understand how to journalize it in terms of overapplied and underapplied. I thought if it was overapplied then you debit Manufacturing overhead... the answer says to credit MOH and debit WIP. please explain.

0 LLL LLL LULU 39,ZUA. The job contained only four units. If the company bills at a price 60% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer? Limilar PROBLEM 3-27 Comprehensive Problem (L03-1, L03-2, LO3-4, LO3-5, LO3-7] 0ntes Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. All of the company's transactions with custom- ers, employees, and suppliers are conducted in cash; there is no credit. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $330,000 of manufacturing overhead for an estimated activity level of $200,000 direct labor dol. lars. At the beginning of the year, the inventory balances were as follows: 330,000 : 165 200.000 Raw materials ..... Work in process... Finished goods .. $25,000 $10,000 $40,000 Total / & credit cash $63,000 expenses During the year, the following transactions were completed: a. Raw materials purchased for cash, 275,000. b. Raw materials requisitioned for use in production, $280,000 (materials costing $220,000 were charged directly to jobs; the remaining materials were indirect). c. Costs for employee services were incurred as follows: WIP Inventory Direct labor ........... $180,000 mout Indirect labor $72,000 Sales commissions ...... Administrative salaries .... mor YOSDD d. Rent for the year was $18,000 (S13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities). 500D- R O USO e. Utility costs incurred in the factory, S57,000. Tot f. Advertising costs incurred, S140,000.Adi s seyonge Depreciation recorded on equipment, S100,000. (588.000 of this amount was on cauipment used in factory operations, the remaining $12,000 was on equipment used in selling and administrative activities.) Depreclatan exporse h. Manufacturing overhead cost was applied to jobs, $_2_297.000 i Goods that had cost 5675,000 to manufacture according to their job cost sheets were completed. Sales for the year totaled $1,250,000. The total cost to manufacture these goods according to their job cost sheets was $700,000. 330.000 200,000 165 Required: 1. Prepare journal entries to record the transactions for the year. 2. Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts). Compute an ending balance in each account. 3. Is Manufacturing Overhead underapplied or overapplied for the year? Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4. Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manu- factured; all of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)

Answer 1

Explanation:

1) Actual manufacturing overhead costs are debited.Actual overhead costs are debited because they are incurred.

2) Applied manufacturing overhead costs are credited to manufacturing overhead account.Applied overhead costs are credited because they are applied to work in process.

3) In the entry ( H) we just need to record applied overhead. Therefore entry would be as follow:

Date	Account Name	Debit	Credit
H.	Work In Process	$297,000
	To Manufacturing Overhead		$297,000

4) Now, Over Applied Manufacturing Overhead

Applied Overhead > Actual Overhead

5) Under Applied Manufacturing Overhead

Applied Overhead < Actual Overhead

6) Here, actual overhead is:

Entry ( B) ( $ 280,000 - $ 220,000)	$60,000
Entry ( C)	$72,000
Entry ( D)	$ 13,000
Entry.(E)	$57,000
Entry ( G)	$88,000
Total Actual Overhead Incurred	$290,000

7) Here,

Applied Overhead	$297,000
Actual Overhead	$290,000
Over applied manufacturing overhead	$7000

8) Now, entry for over applied manufacturing overhead would be as follow.

Date	Account Name	Debit	Credit
Requirement (3)	Manufacturing overhead	$7000
	To cost of good sold		$7000