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A company applies overhead at a rate of 150% of direct labor cost. Actual overhead cost for the current period is $950,000, and direct labor cost is $600,000.
1. Determine whether there is over- or underapplied overhead using the T-account.
2. Prepare the entry to close over-or underapplied overhead to cost of goods sold.

Respuesta :

1. There is an underapplied overhead of $50,000

2. The journal entry is

Cost of goods sold 50000

       Manufacturing overhead  50000

  • The calculation is as follows:

1.

= Actual overhead - applied overhead

= $950,000 - (150% of $600,000)

= $950,000 - $900,000

= $50,000

2. The journal entry is

Cost of goods sold 50000

       Manufacturing overhead  50000

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