Question

Smith Foundry uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following: (Click the icon to view the costs.) Smith's accountant found an error in the expense records from the year reported. Depreciation on manufacturing plant and equipment was actually $415,000, not the $490,000 that had originally been reported. The unadjusted Cost of Goods Sold balance at year-end was $600,000. The manufacturing overhead allocated to jobs was $456,000. Read the requirements.

Answer 1

1)

	Type of expense	Manufacturing overhead incurred
Direct labor cost	Direct labor
Depreciation on plant and equipment	Manufacturing overhead	415000
property taxes on plant	Manufacturing overhead	21500
sales salaries	Selling and administrative	0
delivery wages	Selling and administrative	0
plant janitorial wages	Manufacturing overhead	10000
Total manufacturing overhead		446500

Journal entry to record actual overhead

Date	Account title	Debit	credit
	Manufacturing overhead	446500
	Accumuated depreciation-plant and equipment		415000
	property taxes payable		21500
	Wages payable		10000

2)

Date	Account title	Debit	credit
	work in process inventory	456000
	Manufacturing overhead		456000

3)Manufacturing overhead over-allocated by 9500

MANUFACTURING OVERHEAD
Actual overhead	446500	Applied overhead	456000
		Bal (456000-446500)	9500

4)

Date	Account title	Debit	credit
	Manufacturing overhead	9500
	cost of goods sold		9500

5)

Adjusted cost of goods sold =Unadjusted balance of cost of goods sold - Over-allocation of overhead

           = 600000 -9500

             = 590500