Question

Overhead Variances and Their Disposal Warner Company has the following data for the past year: Actual overhead $660,500 Applied overhead: Work-in-process inventory $140,000 280,000 Finished goods inventory Cost of goods sold 280,000 Total $700,000 Warner uses the overhead control account to accumulate both actual and applied overhead. Required: 1. Calculate the overhead variance for the year. s Provide the appropriate adjusting journal entry to close the overhead variance to Cost of Goods Sold. 2. Assume the variance calculated is material. After prorating, close the variances to the appropriate accounts. If an amount box does not require an entry, leave it blank.
Overhead Variances and Their Disposal Warner Company has the following data for the past year: Actual overhead $660,500 Applied overhead: Work-in-process inventory $140,000 Finished goods inventory 280,000 Cost of goods sold 280,000 Total $700,000

Answer 1

Solution:

1.

Overhead variance = Actual - applied overhead = 660,500 - 700,000 = 39,500 overapplied

Overhead control	39,500
To cost of goods sold		39,500

2.

Overhead contol	39,500
To cost of goods sold		15800 (39500 x 280,000/700000)
TO work in process inventory a/c		7900
To finished goods inventory a/c		15800

	Unadjusted Balance	Prorated overapplied Overhead	Adjusted Balance
work in process inventory	1,00,000	7900	92,100 (100000-7900)
Finished goods inventory	2,00,000	15800	1,84,200
cost of goods sold	2,00,000	15800	1,84,200

3.

Variance material

Cost of goods sold a/c Dr	39,500
To over head control a/c		39,500

Variance material

cost of goods sold a/c dr	15800
work in process inventory a/c	7900
finished goods inventory a/c dr	15800
To overhead control a/c		39,500