Question

Manufacturing overhead applied	$	150,000
Actual amount of manufacturing overhead costs		120,000
Amount of overhead applied during the year that is in:
Work in Process	$	37,500	25	%
Finished Goods		52,500	35	%
Cost of Goods Sold		60,000	40	%
Total overhead applied	$	150,000	100	%

Knowledge Check 01

If the Manufacturing Overhead account is closed to Cost of Goods Sold, the related entry will ________.

• decrease the cost of goods sold by $30,000

• increase the cost of goods sold by $30,000

• decrease the cost of goods sold by $150,000

• increase the cost of goods sold by $150,000

Knowledge Check 02

If the Manufacturing Overhead account is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold, the related entry will include a ________.

• debit to Cost of Goods Sold for $12,000

• credit to Cost of Goods Sold for $12,000

• credit to Cost of Goods Sold for $30,000

• debit to Work in Process for $7,500

Answer 1

Applied overhead = $150000

Actual overhead = $120000

Over applied overhead = 150000-120000 = $30000

1) Journal entry

Date	account and explanation	debit	credit
	Manufacturing overhead	30000
	Cost of goods sold		30000

So answer is a) decrease the cost of goods sold by $30,000

2) Journal entry

Date	account and explanation	debit	credit
	Manufacturing overhead	30000
	Work in process (30000*25%)		7500
	Finished goods (30000*35%)		10500
	Cost of goods sold		12000

So answer is b) Credit to cost of goods sold for $12000