3-b. Prepare a journal entry to close out the balance in the manufacturing overh

Question

3-b. Prepare a journal entry to close out the balance in the manufacturing overhead account to cost of goods sold (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal pl places. View transaction list Journal entry worksheet Record the entry to close the balance of the manufacturing overhead account to COGS account. Note: Enter debits before credits Event General Journal Debit Credit Record entry Clear entry View general journal

Explanation / Answer

Solution:

Part 1 ---

Variable Manufacturing Overhead Per Machine Hour

$0.90

Plus: Fixed Manufacturing Overhead Per Machine Hour

($155,200 / 97,000 MHs)

$1.60

Predetermined Overhead Rate

$2.50 per MH

Part 2 –

Machine Hours worked = 92,000 MHs

Applied Manufacturing Overhead Cost to Work In Process = MHs Worked 92,000 x Predetermined Overhead Rate $2.50 = $230,000

Manufacturing Overhead

Maintenance

$38,000

$230,000

Applied Manufacturing OH (Work In Process)

Indirect materials

$9,700

Indirect labor

$70,000

Utilities

$44,000

Insurance

$8,700

Depreciation

$62,000

Ending Balance

$2,400

Work In Process

Direct materials

$880,000

Direct labor

$107,000

Overhead

$230,000

Part 3(a) ---

Total Overhead Incurred during the year = Sum total of Manufacturing Overhead Account $232,400

Applied Manufacturing Overhead as per part 2 = $230,000

Applied Manufacturing Overheads are less than actual overhead, it means Overheads are UNDER-APPLIED by $2,400

UNDER-APPLIED OVERHEAD = $2,400

Part 3(b) –

Account Titles and Explanation

Debit

Credit

Cost of Goods Sold

$2,400

   Under-Applied Manufacturing Overhead or Manufacturing Overhead

$2,400

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Variable Manufacturing Overhead Per Machine Hour

$0.90

Plus: Fixed Manufacturing Overhead Per Machine Hour

($155,200 / 97,000 MHs)

$1.60

Predetermined Overhead Rate

$2.50 per MH

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