Luca Pacioli, CPA, founder of Double-Entry Accountants, LLC, a service firm, provides the following information for the most recent year of operations.
Double-Entry Accountants, LLC, applies overhead at a rate of 20% of Direct Labor Cost.
Any underapplied or overapplied overhead is eliminated by closing the amount out to Cost of Sales, using the Direct Write-Off Method.
Instructions: Students should compute the following items based upon the provided information.
a. Determine the amount of underapplied or overapplied manufacturing overhead.
b. Prepare the journal entry to dispose of any overapplied or underapplied manufacturing overhead.
c. Compute firm's gross margin that will appear on Double-Entry Accountant's income statement, after adjustments are made.

Question

Luca Pacioli, CPA, founder of Double-Entry Accountants, LLC, a service firm, provides the following information for the most recent year of operations.
  Double-Entry Accountants, LLC, applies overhead at a rate of 20% of Direct Labor Cost.
Any underapplied or overapplied overhead is eliminated by closing the amount out to Cost of Sales, using the Direct Write-Off Method.
Instructions: Students should compute the following items based upon the provided information.
a. Determine the amount of underapplied or overapplied manufacturing overhead.
b. Prepare the journal entry to dispose of any overapplied or underapplied manufacturing overhead.
c. Compute firm's gross margin that will appear on Double-Entry Accountant's income statement, after adjustments are made.

Quizplus · Accepted Answer

The Answer of Luca Pacioli, CPA, founder of Double-Entry Accountants, LLC, a service firm, provides the following information for the most recent year of operations.
  Double-Entry Accountants, LLC, applies overhead at a rate of 20% of Direct Labor Cost.
Any underapplied or overapplied overhead is eliminated by closing the amount out to Cost of Sales, using the Direct Write-Off Method.
Instructions: Students should compute the following items based upon the provided information.
a. Determine the amount of underapplied or overapplied manufacturing overhead.
b. Prepare the journal entry to dispose of any overapplied or underapplied manufacturing overhead.
c. Compute firm's gross margin that will appear on Double-Entry Accountant's income statement, after adjustments are made.

Luca Pacioli, CPA, Founder of Double-Entry Accountants, LLC, a Service