Answer:
Southern Rim Parts
Journal Entry:
Account Title Debit Credit
Work-in-process inventory $9,760
Finished goods inventory 24,400
Cost of goods sold 63,440
Manufacturing overhead $97,600
To record the prorated under-applied overhead cost.
Explanation:
a) Data and Calculations:
Estimated manufacturing overhead = $396,000
Estimated direct labor costs = $990,000
Actual manufacturing overhead = $434,000
Actual direct labor costs = $841,000
Predetermined overhead rate = estimated overhead/estimated direct labor costs = $396,000/$990,000 = $0.40 per DL
Applied overhead:
Work-in-process inventory $ 33,640
Finished goods inventory 84,100
Cost of goods sold 218,660
Total overhead applied = $336,400
Underapplied overhead = $97,600 ($434,000 - $336,400)
Prorating the underapplied overhead to:
Work-in-process inventory $33,640/$336,400 * $97,600 = $9,760
Finished goods inventory 84,100/$336,400 * $97,600 = $24,400
Cost of goods sold 218,660/$336,400 * $97,600 = $63,440
Total underapplied overhead = $97,600
