Question

Assume the following: Actual Variable Overhead $17,000 Allocated Variable Overhead $18,000 Budgeted Variable Overhead $17,500 VOH...

Assume the following:

Actual Variable Overhead $17,000
Allocated Variable Overhead $18,000
Budgeted Variable Overhead $17,500
VOH Spending Variance Variance $1500 F
VOH Efficiency Variance $500 U

Prepare the following journal entries:

a. Record Actual Overhead

b. Record Allocated Overhead

c. Record the variances and close the overhead accounts

d. Close the variance accounts

Answer the following questions:

e. Is overhead under or over-applied?

f. Did you increase or decrease COGS in entry (d)? Why does this make sense?

Business   Accounting   
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Homework Answers

Answer #1

Ans-(a) to (d)

Ans-(e)

There is on over applied scenario as Actual O/H 17000 is lower than applied amount of 18000

Ans-(f)

CoGS has been reduced

Reason:

CoGS get calculated at the applied rate (refer entry b in the journal table).This leads to an inflation in cost to the tune of 1000.This by adjustment entry is taken care by reducing CoGS by amount of over charged O/H.

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