Wang's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000. Actual factory overhead was $312,330 and actual machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold was $725,000 and ending inventories were as follows:
$$\begin{array} { l r }
\text { WIP } & \$ 150,000 \
\text { Finished goods } & 375,000 \
\text {Total } & \$ 525,000 \
\end{array}$$
Required:
a. Compute the amount of overhead applied to production.
b. Prepare the journal entry to dispose of the over/underapplied overhead using the write-off to cost of goods sold approach.
c. Prepare the journal entry to dispose of the over/underapplied overhead using the proration approach.

Question

Wang's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000. Actual factory overhead was $312,330 and actual machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold was $725,000 and ending inventories were as follows:
 $$\begin{array} { l r } 
\text { WIP } & \$ 150,000 \
\text { Finished goods } & 375,000 \
\text  {Total } & \$ 525,000 \
\end{array}$$ 
Required:
a. Compute the amount of overhead applied to production.
b. Prepare the journal entry to dispose of the over/underapplied overhead using the write-off to cost of goods sold approach.
c. Prepare the journal entry to dispose of the over/underapplied overhead using the proration approach.

Quizplus · Accepted Answer

The Answer of Wang's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000. Actual factory overhead was $312,330 and actual machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold was $725,000 and ending inventories were as follows:
 $$\begin{array} { l r } 
\text { WIP } & \$ 150,000 \
\text { Finished goods } & 375,000 \
\text  {Total } & \$ 525,000 \
\end{array}$$ 
Required:
a. Compute the amount of overhead applied to production.
b. Prepare the journal entry to dispose of the over/underapplied overhead using the write-off to cost of goods sold approach.
c. Prepare the journal entry to dispose of the over/underapplied overhead using the proration approach.

Wang's Corporation Applies Overhead Based Upon Machine-Hours WIP $150,000 Finished goods 375,000Total $525,000\begin{array} { l r } \text { WIP } & \$ 150,000 \\\text { Finished goods } & 375,000 \\\text {Total } & \$ 525,000 \\\end{array} WIP Finished goods Total ​$150,000375,000$525,000​

Wang's Corporation Applies Overhead Based Upon Machine-Hours $\begin{array} { l r } \text { WIP } & \$ 150,000 \\\text { Finished goods } & 375,000 \\\text {Total } & \$ 525,000 \\\end{array}$