Question

Aspen Company estimates its manufacturing overhead to be $615,600 and its direct labor costs to be $513,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $211,575. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $368,550. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $102,375. Actual manufacturing overhead for year 2 was $805,100. Manufacturing overhead is applied on the basis of direct labor costs.

Required:

Prepare an entry to allocate over- or underapplied overhead to Work in Process, Finished Goods and Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Jounal Entry:

Journal Entry
Account and explantion	Debit	Credit
Manuf. OH	13900
Work In process		4309
Finished Goods		7506
Cost of Goods Sold		2085
(To record overder applied OH)

Working Notes:

Calculation of underapplied/overapplied OH
OH Rate	120%	(615600/513000)
(Estimated Manuf OH / Direct Labor Costs)
Applied OH- working note	819000	61000*19
Actual OH	805100
Over applied OH	13900

Calculation of applied Manuf. OH and allocation of of Over applied OH
	Labor Costs	Manuf. OH applied 120%	Allocation of Over applied OH
Job 2-1	211575	253890	4309
Job 2-2	368550	442260	7506
Job 2-3	102375	122850	2085
	682500	819000	13900