Question

18 For its first month of operations, Stellar Company worked on only two jobs--Job X and Job Y. Job X consisted of 500 units, 400 of which were sold to customers and 100 of which remained in Finished Goods at the end of the month Job Y consisted of 200 units and it was incomplete at the end of the month. The company also provides the following data: 4 per DLH Predetermined overhead rate (POHR) Actual direct labor hours (DLHS) used in each job: Job X Job Y Actual manufacturing overhead costs incurred during the month 15,000 DLHS 10,000 DLHS 95,000 $ Stellar closes any under-applied or over-applied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold at the end of every month. Which of the following statements is true regarding the journal entry to close any under-applied or over-applied overhead for Stellar at the end of the month? A The journal entry includes a credit to the Manufacturing Overhead (MOH) account for $5,000 B. The journal entry includes a credit to the Work in Process (WIP) account for $600. C. The journal entry includes a credit to the Cost of Goods Sold (COGS) account for $5,000. D. The journal entry includes a credit to the Direct Material (DM) account for $600. E. The journal entry includes a credit to the Finished Goods (FG) account for $600.

Answer 1

Applied overhead = actual labor hour*predetermine overhead rate = 25000*4 = $100000

Actual overhead = 95000

Over applied overhead = 100000-95000 = 5000

Journal entry

Date	General Journal	Debit	Credit
	Manufacturing overhead	5000
	Work in process (5000/25000*10000)		2000
	Finished goods (5000/25000*3000)		600
	Cost of goods sold		2400

So answer is e) The journal entry includes a credit to the finished goods (FG) account for $600