Sanker Inc. has provided the following data for the month of August. There were

Question

Sanker Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.

Work In
Process Finished
Goods Cost of
Goods Sold Total
Direct materials $2,790 $7,680 $18,240 $28,710
Direct labor 9,700 19,200 45,600 74,500
Manufacturing
overhead applied 5,440 8,000 18,560 32,000
Total $17,930 $34,880 $82,400 $135,210

Manufacturing overhead for the month was overapplied by $5,000. The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.

19. The journal entry to record the allocation of any underapplied or overapplied overhead for August would include

A. credit to finished goods of $34,880.
B. debit to finished goods of $1,250.
C. debit to finished goods of $34,880.
D. credit to finished goods of $1,250.

Explanation / Answer

Manufacturing overhead was overapplied by $5,000. Total overhead applied during the month = $32,000. Amount of overhead applied to finished goods = $8,000. Amount of underapplied overhead to allocate to Finished goods = 5,000*(8,000/32,000) = $1250. Answer: B, Credit to finished goods of $1,250

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