Southern Rim Parts estimates its manufacturing overhead to be $282,000 and its d

Question

Southern Rim Parts estimates its manufacturing overhead to be $282,000 and its direct labor costs to be $940,000 for year 1. The first three jobs that Southern Rim worked on had actual direct labor costs of $53,000 for Job 301, $78,000 for Job 302, and $115,000 for Job 303. For the year, actual manufacturing overhead was $459,000 and total direct labor cost was $846,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs using predetermined rates.

Overhead applied in each of the inventory accounts is as follows:

Required:

Prepare an entry to prorate the under- or overapplied overhead. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Work-in-process inventory $ 25,380 Finished goods inventory 63,450 Cost of goods sold 164,970

Explanation / Answer

Under applied Manufacturing Overhead = 459000 - 253800 = 205200 applied o/h calculation under applied o/h WIP INVENTORY 25380 205200*25380/253800 20520 FG INVENTORY 63450 205200*63450/253801 51300 COGS 164970 205200*164970/253802 133380 Total 253800 205200 Entry towards under application of manufacturing overhead: Debit $ Credit $ Debit WIP Inventory 20520 Debit FG Inventory 51300 Debit COGS 133380 Credit Manufacturing Overhead 205200

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