Gary Company had the following balances as of December 31, 20X5: $\begin{array}{ll}
\text { Cost of goods sold } & \$ 250,000 \
\text { Direct-materials inventory } & 50,000 \
\text { WIP inventory } & 170,000 \
\text { Finished goods inventory } & 80,000 \
\text { Factory dep artment overhead control } & 25,000 \text { Credit }
\end{array}$ Required:
a. Does the variance represent overapplied or underapplied overhead?
b. Prepare the entry to dispose of the variance using the proration method.
c. What effect, if any, did the entry in part b. have on gross profit?

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The Answer of Gary Company had the following balances as of December 31, 20X5: $\begin{array}{ll}
\text { Cost of goods sold } & \$ 250,000 \
\text { Direct-materials inventory } & 50,000 \
\text { WIP inventory } & 170,000 \
\text { Finished goods inventory } & 80,000 \
\text { Factory dep artment overhead control } & 25,000 \text { Credit }
\end{array}$ Required:
a. Does the variance represent overapplied or underapplied overhead?
b. Prepare the entry to dispose of the variance using the proration method.
c. What effect, if any, did the entry in part b. have on gross profit?

Gary Company Had the Following Balances as of December 31