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Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applie
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Answer #1
Computation of Underapplied/ OverApplied Overhead
Actual Manufacturing Overhead cost
(A)
$850,000.00
Applied Manufacturing Cost
(B) (60000Mhours X $12)
$720,000.00
Under-applied manufacturing overhead (A-B) $130,000.00
W/ No-1 Predetermined overhead rate = Total Manufacturing Overhead / Estimated Machine Hour = $900,000 / 75,000 = $12/ Machine Hour
Computation of Underapplied/ OverApplied Overhead
Actual Manufacturing Overhead cost
(A)
$850,000.00
Applied Manufacturing Cost
(B) (60000 Mhours X $12)
$720,000.00
Under-applied manufacturing overhead (A-B) $130,000.00
2. Journal Entry
Account Tittle & Explanation Debit Credit
Cost of goods sold 130,000
Manufacturing overhead 130,000
To Record booked Under applied Overhead

Working Note Computation of Overhead Applied during the year

Amount Percent (%)
Work in process 36,000 5%
Finished goods 180,000 25%
Cost of goods sold 504,000 70%
Total 720,000 100%
part-3 Journal Entry
Account Tittle & Explanation Debit Credit
Work in process (5%*130,000) 6,500
Finished goods (25%*130,000) 32,500
Cost of goods sold (70%*15,000) 91,000
  Manufacturing overhead 130,000
Part-4
Revised cost of Goods Sold ( if underapplied Closed to COGS (1400000+130000) 1,530,000
Cost of goods sold (if the underapplied overhead is allocated among the accounts) (1400000 +91000) 1,491,000
Net Income will be increased by 39,000
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