Warren Company uses a predetermined overhead rate. Overhead for the next twelve months is estimated to be $480,000. Jackson applies overhead as a percentage of direct labor cost. Direct labor costs are estimated to be $400,000 for the next year. During the year actual direct labor costs amounted to $520,000 and the actual overhead was $605,000.
Required:
(1) Calculate the over/under-applied overhead for the year.
(2) Prepare the journal entries to close the accounts, assuming that the over/under-applied overhead is closed to cost of goods sold.

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The Answer of Warren Company uses a predetermined overhead rate. Overhead for the next twelve months is estimated to be $480,000. Jackson applies overhead as a percentage of direct labor cost. Direct labor costs are estimated to be $400,000 for the next year. During the year actual direct labor costs amounted to $520,000 and the actual overhead was $605,000.
Required:
(1) Calculate the over/under-applied overhead for the year.
(2) Prepare the journal entries to close the accounts, assuming that the over/under-applied overhead is closed to cost of goods sold.

Warren Company Uses a Predetermined Overhead Rate