Question

XYZ uses job costing. Actual manufacturing overhead for the period is

$ 20 comma 400$20,400

while allocated manufacturing overhead is

$ 18 comma 900$18,900.

What entry will close the manufacturing overhead? balance?

A.

Debit the Cost of Goods Sold account and credit the Finished Goods Inventory account for

$ 1 comma 500$1,500.

B.

Debit the Cost of Goods Sold account and credit the Manufacturing Overhead account for

$ 1 comma 500$1,500.

C.

Debit the Manufacturing Overhead account and credit the Cost of Goods Sold account for

$ 1 comma 500$1,500.

D.

Debit the Manufacturing Overhead account and credit the

Workminus?inminus?Process

account for

$ 1 comma 500$1,500.

Answer 1

Overhead applied/ allocated = $18900

Actual Overhead = $20,400

Difference = $1500

In the above case overhead is underapplied by $1500 which means Cost of Goods sold account is under-expensed by $1500. It also means this expense is lying in the manufacturing overhead account. We simply transfer the debit balnce in manufacturing overhead account by credituing it to cost of goods sold account by debiting it.

The entry will be

B. Debit Cost of Goods sold account and credit Manufacturing Overhead account for $1,500.