During the month of September, Reading Inc. applied overhead to jobs using an ov

Question

During the month of September, Reading Inc. applied overhead to jobs using an overhead rate of $0.80 per dollar of direct labor. Direct labor in August was $65,000. Actual overhead in August was $51,200.

Actual overhead was composed of the following items:
Indirect materials $21,200
Indirect labor $6,800
Utilities $1,400
Depreciation $12,500
Repair expense $9,300
Total $51,200

Determine the balance in manufacturing overhead and prepare a journal entry to close the balance to cost of goods sold

My thoughts are that the balance should $13800, I submitted this for review and my teacher is telling me that it is wrong, or my journal entry may be wrong. Does anybody else have a thought on this please.

Explanation / Answer

Difference = $13800. The overhead is overapplied. Journal entry: Manufacturing overhead Dr $13800 Cost of goods sold Cr $13800

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