To determine Prepare an entry to allocate the under or over applied overhead . Explanation Journal entries ( job costing ): The journal entries are prepared in order to record the day to day transactions of the entity. The journal entries in job costing are prepared by starting from the materials inventory. The balances are then transferred to work-in-process inventory and thereafter to finished goods inventory. Over-applied overheads: This is the amount of overhead which arises when the amount of actual overheads is less than the amount of overheads applied. Under-applied overheads: It is the amount of overhead cost which is not applied to the jobs during the period. Under-applied overheads occur when the actual overheads are more than the applied overheads. Journal entry for the allocation of under applied overhead: Date Accounts and explanation Post Ref. Debit Credit Applied manufacturing overhead (1) $ 467,500 Work-in-process inventory (8%) (2) $ 920 Finished goods inventory (22%) (3) $ 2,530 Cost of goods sold (70%) (4) $ 8,050 Manufacturing overhead control (5) $ 479,000 (To record under applied overhead) Table: (2) Working note 1: Compute the applied manufacturing overhead: Particulars Amount Work-in-process inventory $ 37,400 Add: Finished goods inventory $ 102,850 Add: Cost of goods sold $ 327,250 Applied manufacturing overhead $ 467,500 Table: (3) Working note 2: Compute the rate of work-in-process inventory in applied manufacturing overhead: Rate of Work-in-process = Work-in-process inventory Total mamufacturing overhead × 100 = $ 37 , 400 $ 467 , 500 × 100 = 8 % Compute the work-in-process inventory: Work - in- process inventory = Rate of work-in-process × Under applied manufacturing overhead = 8% × $11,500 = $920 Working note 3: Compute the rate of finished goods inventory in applied manufacturing overhead: Rate of finished goods = Finished goods inventory Total mamufacturing overhead × 100 <

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ISBN: 9781266742040

Author: LANEN

Publisher: MCG

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Chapter 7, Problem 30E

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Prepare an entry to allocate the under or over applied overhead.

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Chapter 7, Problem 29E

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Chapter 7 Solutions

FUNDAMENTALS OF COST ACCOUNTING

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