Applied vs. Actual Manufacturing Overhead Davis Manufacturing Corporation applie

Question

Applied vs. Actual Manufacturing Overhead Davis Manufacturing Corporation applies manufacturing overhead on the basis of 150% of direct labor cost. An analysis of the related accounts and job order cost sheet indicates that during the year total manufacturing overhead incurred was $157,500 and that at year-end Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold included $20,000, $10,000, and $70,000, respectively, of direct labor incurred during the current year. a. Determine the under applied manufacturing overhead at year end (assume it is significant, Applied Manufacturing Overhead Work in process 100,000 x Finished goods Cost of goods sold 157,500x 150,000 Total: s 407,500 x Under-applied manufacturing overhead $ 75,000 b. Prepare a journal entry to record the disposition of the underapplied manufacturing overhead. General Journal Description Debit Credit Work in process inventory V 1,500 Finished goods inventory 750

Explanation / Answer

overhead underapplied =actual -applied

             157500-150000

              7500

Applied manufacturing overhead work in process [20000*150%] 30000 Finished goods   [10000*150%] 15000 cost of goods sold [70000*150%] 105000 Total 150000

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