Dillon Corporation applies manufacturing overhead to jobs using a predetermined
ID: 2498565 • Letter: D
Question
Dillon Corporation applies manufacturing overhead to jobs using a predetermined overhead rate of 75% of direct labor cost. Any under or overapplied manufacturing overhead cost is closed out to Cost of Goods Sold at the end of the month. During May, the following transactions were recorded by the company:
Raw materials (all direct materials):
Purchased during the month $38,000
Used in production $35,000
Labor:
Direct labor-hours worked during the month $3,150
Direct labor cost incurred $30,000
Manufacturing overhead cost incurred (total) $24,500
Inventories:
Raw materials (all direct), May 31 $8,000
Work in process, May 1 $9,000
Work in process, May 31 $12,000*
*Contains $4,400 in direct labor cost
The entry to dispose of the under or overapplied manufacturing overhead cost for the month would include:
a debit of $2,000 to the Manufacturing Overhead account.
a credit of $2,500 to the Manufacturing Overhead account.
a debit of $2,000 to Cost of Goods Sold.
a credit of $2,500 to Cost of Goods Sold.
a debit of $2,000 to the Manufacturing Overhead account.
a credit of $2,500 to the Manufacturing Overhead account.
a debit of $2,000 to Cost of Goods Sold.
a credit of $2,500 to Cost of Goods Sold.
Explanation / Answer
Direct labour 30000 MOH appied to Job 22500 MOH Incurred 24500 MOH a/c Incurred 24500 Applied to Job 22500 Under -appiled OH Trf to COGS 2000 24500 24500 The Journal entry will be COGS 2000 MOH 2000 So, ANSWER is a debit of $2,000 to COGS
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