Question

Overhead Variances and Their Disposal

Warner Company has the following data for the past year:

Actual overhead	$240,500
Applied overhead:
Work-in-process inventory	$56,000
Finished goods inventory	112,000
Cost of goods sold	112,000
Total	$280,000

Warner uses the overhead control account to accumulate both actual and applied overhead.

Required:

1. Calculate the overhead variance for the year.
$

Provide the appropriate adjusting journal entry to close the overhead variance to Cost of Goods Sold.

Assume the variance calculated is material. After prorating, close the variances to the appropriate accounts. If an amount box does not require an entry, leave it blank.

Assume the variance calculated is material. After prorating, provide the final ending balances of these accounts.

	Unadjusted Balance		Prorated Overapplied Overhead		Adjusted Balance
Work-in-Process Inventory	$56,000		$		$
Finished Goods Inventory	$112,000		$		$
Cost of Goods Sold	$112,000		$		$

3. What if the variance is of the opposite sign calculated in Requirement 1? Provide the appropriate adjusting journal entries for Requirements 1 and 2. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Variance Immaterial

Variance Material

Answer 1