Question

Schulz Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of under/overapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:

Direct Materials: $60,000

WIP: 190,000

Finished Goods: 250,000

Total: $500,000

1) Determine the budgeted factor overhead rate per machine-hour.

2) Compute the over/underapplied overhead.

3) Select the journal entry to dispose of the variance using the write-off to cost of goods sold approach.

A) Dr. Work-in-Process, $13,600 Cr. Cost of Goods sold, $13,600

B) Dr. Manufacturing Overhead Contorl, $13,600 Cr. Cost of Goods Sold, $13,600

C) Dr. Manufacutring Overhead Allocated, $274,320 Dr. Cost of Goods Sold, $13,600 Cr. Manufacturing Overhead Control, $287,920

D) Dr. Manufacutring Overhead Control, $274,320 Dr. Cost of Goods Sold, $13,600 Cr. Manufacturing Overhead Allocated, $287,920

4) Select the journal entry to dispose of the variance using the proration approach using ending balances.

A) Dr. Manufacutring Overhead Control, $274,320 Dr. Cost of Goods Sold, $13,600 Cr. Manufacturing Overhead Allocated, $287,920

B) Dr. Cost of Goods Sold, $7,616 Dr. Work-in-Process, $2,584 Dr. Finished Goods, $3,400 Dr. Manufacturing Overhead Allocated, $274,320 Cr. Manufacturing Overhead Control, $287,920

C) Dr. Cost of Goods Sold, $13,600 Cr. Manufacturing Overhead allocated, $13,600

D) Dr. Cost of Goods Sold, $7,616 Dr. Work-in-Process, $2,584 Dr. Finished Goods, $3,400 Cr. Manufacturing Overhead Allocated, $13,600

I know I'm only allowed to ask one question at a time, but all four question are from the same provided info. Thank You!!

Answer 1

Ans. Calculation of budgeted factory overhead Rate: Total Factory overhead/total no of machine hours

                                                                                  : 266400/18500 = 14.40 per machine hours

Total actual machine hours = 19050

Applied overhead (19050X14.40) = 274320

Actual overhead = 287920

That means under applied overhead amt(287920-274320) = $13600

3. Disposition of under applied overhead using the write off entire amt throug cost of goods sold

                         Manufacturing overhead Allocated A/c Dr. $274320

   Cost of goods sold A/c                         Dr. $13600

                               To Manufacturing O/h control ac A/c Cr.                 $287920

                        (Overhead variance write off through cost of goods sold)

Option C is correct

4. Diposing overhead variance through using ending balance

                                        Amt                   Variance

Cost of goods sold   =    560000               7616      (13600X5.60/10)

WIP                          =    190000               2584

Finished goods        =    250000               3400

                                      1000000             13600

Diposal of variance journal Entries

                        Cost of goods sold A/c Dr          7616

                        WIP A/c                        Dr.          2584

                        Finished goods            Dr.          3400

                              To Manufacturing A/c                    13600

    (Overhead variance diposal through allocation method in ending stock balance)

Option D is correc