Question

7 Jacobs Company manufactures refrigerators. The company uses a budgeted indirect-cost rate for its manufacturing operations and during 2018 allocated $1,000,000 to work-in-process inventory. Actual overhead incurred was $1,100,000. Ending balances in the following accounts are: Work-in-Process $ 100,000 i bloicas bloeod al mod to 750,000 ellomrollo Finished Goods Cost of Goods Sold ( 8 Required: (16 points) a. Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances. Be sure your journal entry closes the related overhead accounts.

Answer 1

Actual overhead = $1,100,000

Applied overhead = $1,000,000

Under applied overhead = Actual overhead - Applied overhead

= 1,100,000-1,000,000

= $100,000

	Ending Balance	Ending Balance Percentage	Under applied overhead allocated
Work in process	100,000	100,000/5,000,000 = 2%	100,000 x 2% = 2,000
Finished goods	750,000	750,000/5,000,000 = 15%	100,000 x 15% = 15,000
Cost of goods sold	4,150,000	4,150,000/5,000,000 = 83%	100,000 x 83% = 83,000
	5,000,000

General Journal	Debit	Credit
Work in process	$2,000
Finished goods	$15,000
Cost of good sold	$83,000
Manufacturing overhead		$100,000

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