Wang's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000. Actual factory overhead was $312,330 and actual machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold was $725,000 and ending inventories were as follows: WIP$150,000 Finished goods 375,000 Total$525,000 Required:a. Compute the amount of overhead applied to production.b. Prepare the journal entry to dispose of the over/underapplied overhead using the write-off to cost of goods sold approach.c. Prepare the journal entry to dispose of the over/underapplied overhead using the proration approach.
What will be an ideal response?
(a)
$316,500
Overhead Rate = $325,000/13,000 = $25/hr; 12,660 hrs × $25 = $316,500
(b)
| Manufacturing Overhead | 4,170 | ||
| Cost of Goods Sold | 4,170 | ||
(c)
| Manufacturing Overhead | 4,170 | ||
| WIP Inventory | 500 | ||
| Finished Goods Inventory | 1,251 | ||
| Cost of Goods Sold | 2,419 |
| WIP | $ | 150,000 | 0.12 | $ | 500 | ||
| FG | 375,000 | 0.30 | 1,251 | ||||
| COGS | 725,000 | 0.58 | 2,419 | ||||
| $ | 1,250,000 | $ | 4,170 |
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