Question

Cambridge Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the company estimated its total overhead cost to be $298,300 and machine hours to be 15,700. Actual manufacturing overhead and machine hours were $336,300 and 16,700, respectively.

Required:
1. & 2. Prepare the journal entries for actual and applied manufacturing overhead and transfer of manufacturing overhead account balance to cost of goods sold. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

• Record the actual manufacturing overhead cost incurred.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
a

• Record the application of manufacturing overhead to production.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
b

• Record the transfer of manufacturing overhead account balance to cost of goods sold.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
c

Answer 1

OH rate based on Mh:
Estimated Overheads	298300
Divide: Estimated DLH	15700
OH rate based on Mh:	19	per MH
Journal entries:
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Manufacturing Overheads		336300
	Accounts payable				336300
	(for overheads incurred)
b.	Work in process inventory		317300
	Manufacturing overheads	(16700 Mh @19)	317300
	(for overheads applied)
c.	Cost of goods sold (336300-317300)	19000
	Manufacturing overheads			19000
	(for under-applied closed to cost of goods sold)