XYZ Ltd incurred $500 000 of manufacturing overhead costs during the financial year 2021. However, only $400 000 of overhead was applied to production. At the end of the financial year, the following amounts of the applied overhead remained in the various manufacturing accounts: Work in process inventory Finished goods inventory Cost of goods sold $80,000 100,000 220,000

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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3. XYZ Ltd incurred $500 000 of manufacturing overhead costs during the financial year 2021.
However, only $400 000 of overhead was applied to production. At the end of the financial
year, the following amounts of the applied overhead remained in the various manufacturing
accounts:
Work in process inventory
Finished goods inventory
Cost of goods sold
$80,000
100,000
220,000
Required:
a. Explain whether the overhead cost was over applied or under applied to production.
Determine the amount.
Transcribed Image Text:3. XYZ Ltd incurred $500 000 of manufacturing overhead costs during the financial year 2021. However, only $400 000 of overhead was applied to production. At the end of the financial year, the following amounts of the applied overhead remained in the various manufacturing accounts: Work in process inventory Finished goods inventory Cost of goods sold $80,000 100,000 220,000 Required: a. Explain whether the overhead cost was over applied or under applied to production. Determine the amount.
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