1
Determine the budgeted factory overhead rate per machine
hour
budgeted factory overhead rate per machine hour
= budgeted factory overhead/ Machine Hour
=275,000/19000
=$14.47 per machine Hour
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2
Compute the over/underapplied overhead
Applied OH
=$14.47*19100 machine hour
over/under applied overhead
=Applied -Actual
=14.47*19100-270,000
=276377-270,000
=6377 Over applied
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3
Prepare the journal entry to dispose of the variance using the
write-off to cost of goods sold approach
|
|
|
|
Journal
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Debit $
|
Credit $
|
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Factory department Overhead control
|
6377
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Cost of goods sold
|
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6377
|
__________________________________________________
4Prepare the journal entry to dispose of the variance using the
proration approach.
500,000+200,000+300,000
=1,000,000
Cost of goods sold
=500,000/1,000,000=50%x6377=$3189
WIP
=200,000/1,000,000=20%x6377=$1275
Finished goods
=300,000/1,000,000=30%x6377=$1913
|
|
|
|
Journal
|
Debit $
|
Credit $
|
|
Factory department Overhead control
|
6377
|
|
|
Cost of goods sold
|
|
3189
|
|
WIP inventory
|
|
1275
|
|
Finished Goods inventory
|
|
1913
|
