Disposition of Over- or Underapplied Overhead. The following information is available concerning the inventory and cost of goods sold accounts of PGA Company at the end of the most recent year: Work in Finished Cost of Goods Process Goods Sold Direct material .............................................................................. $ 5,000 $ 8,000 $ 11,000 Direct labor ................................................................................... 6,000 15,000 15,000 Applied overhead ......................................................................... 4,000 12,000 24,000 Year-end balance.......................................................................... $ 15,000 $ 35,000 $ 50,000 Applied overhead has already been closed to Factory Overhead Control. Required: Give the journal entry required to close Factory Overhead Control, assuming: (1) Overapplied overhead of $10,000 is to be allocated to inventories and Cost of Goods Sold in proportion to the balances in those accounts. (2) Underapplied overhead of $10,000 is to be allocated to inventories and Cost of Goods Sold in proportion to the amounts of applied overhead contained in those accounts.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
6.
Disposition of Over- or Underapplied
inventory and cost of goods sold accounts of PGA Company at the end of the most recent year:
Work in Finished Cost of Goods
Process Goods Sold
Direct material .............................................................................. $ 5,000 $ 8,000 $ 11,000
Direct labor ................................................................................... 6,000 15,000 15,000
Applied overhead ......................................................................... 4,000 12,000 24,000
Year-end balance.......................................................................... $ 15,000 $ 35,000 $ 50,000
Applied overhead has already been closed to Factory Overhead Control.
Required:
Give the
(1) Overapplied overhead of $10,000 is to be allocated to inventories and Cost of Goods Sold in proportion
to the balances in those accounts.
(2) Underapplied overhead of $10,000 is to be allocated to inventories and Cost of Goods Sold in
proportion to the amounts of applied overhead contained in those accounts.
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