Question

During March, Pendergraph Corporation incurred $70,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $72,000.

The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a

Answer 1

Actual manufacturing overheads are lower than Applied overheads hence overheads are over applied. Journal entry will be recorded to reduce the effect of over applied overheads.

Entry to record actual manufacturing overheads will be as follows

Account title	Debit	Credit
Manufacturing overheads	$    2,000.00
WIP inventory		$ 0
Finished goods inventory		$ 0
Cost of goods sold		$2000

I have assumed that Overapplied overheads are adjusted with Cost of goods sold.

Adjustment of Overapplied overheads It depends on the policies of company and the amount of applied overheads on each class of inventory.

IF the above solution does not match with your options then provide options so that I can tell exact answer, if you have any options.