Question

Finlon Upholstery, Inc. uses a job-order costing system to accumulate manufacturing costs. The company's work-in- process on December 31, 20x1, consisted of one job (no. 2077), which was carried on the year-end balance sheet at $156,800. There was no finished-goods inventory on this date. Finlon applies manufacturing overhead to production on the basis of direct-labor cost. (The budgeted direct-labor cost is the company's practical capacity, in terms of direct-labor hours, multiplied by the budgeted direct-labor rate.) Budgeted totals for 20x2 for direct labor and manufacturing overhead are $4,200,000 and $5,460,000, respectively. Actual results for the year follow. Direct material used Direct labor Indirect material used Indirect labor Factory depreciation Factory insurance Factory utilities Selling and administrative expenses Total $ 5,500,000 4,350,000 64,000 2,860,000 1,740,000 58,000 830,000 2,160,000 $ 17,562,000 Job no. 2077 was completed in January 20x2; there was no work in process at year-end. All jobs produced during 20x2 were sold with the exception of job no. 2143, which contained direct-material costs of $155,000 and direct-labor charges of $85,000. The company charges any under- or overapplied overhead to Cost of Goods Sold.

Can someone help me determine how to complete this journal entry?

Answer 1

Budgeted direct labor = $4,200,000

Budgeted manufacturing overhead = $5,460,000

Predetermined overhead rate = Budgeted manufacturing overhead/ Budgeted direct labor

= 5,460,000/4,200,000

= 130% of direct labor cost

Actual direct labor cost = $4,350,000

Manufacturing overhead applied = Actual direct labor cost x Predetermined overhead rate

= 4,350,000 x 130%

= $5,655,000

Actual manufacturing overhead = Indirect materials + Indirect labor + Factory depreciation + Factory insurance + Factory utilities

= 64,000+2,860,000+1,740,000+58,000+830,000

= $5,552,000

Over applied manufacturing overhead = Manufacturing overhead applied - Actual manufacturing overhead

= 5,655,000-5,552,000

= $103,000

Transaction	General Journal	Debit	Credit
1	Manufacturing overhead	$103,000
	Cost of goods sold		$103,000
	( To close over applied manufacturing overhead)

Kindly comment if you need further assistance. Thanks‼!