Exercise 7-28 Prorate Over- or Underapplied Overhead (LO 7-3) Aspen Company esti
ID: 2416308 • Letter: E
Question
Exercise 7-28 Prorate Over- or Underapplied Overhead (LO 7-3) Aspen Company estimates its manufacturing overhead to be $516,000 and its direct labor costs to be $516,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $205,125. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $467,685. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $147,690. Actual manufacturing overhead for year 2 was $828,200. Manufacturing overhead is applied on the basis of direct labor costs.
Required: Prepare an entry to allocate over- or underapplied overhead to Work in Process, Finished Goods and Cost of Goods Sold.Explanation / Answer
Particulars Amount $ Ratio Sold Goods 205125 0.25 Finished Goods 467685 0.57 Work In Progress 147690 0.18 Total Overhead applied 820500 1 Actual Overhead 828200 Under applied overhead 7700 Distribution on the basis of above ratio Date Particulars Amount Dr Amount Cr Year end Cost of goods sold 1925 Finished Goods 4389 Work in Progress 1386 Manufacturing Overhead 7700 (Being under -applied overhead charged to COGS, Finished Goods and work in progress)
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