Question

A camera company applies FOH based on machine hours (MH). At thr beginninv of the year estimated FOH was 200,000 and the estimated MH were 5,000. At then end of the year. Actual FOH was $240,000 and actual MH were 5,000. at the end of the year FOH is

a. underapplied

b. overapplied

by

a. $500

b. $20,000

c. $40,000

d.some amount other than those shown

And the journal entey necessary to resolve the issue at year end will include

a. debit to CGS

b.credit to CGS

c. none of rhe choices are correct

d. credit to WIP Inventory

e. debit to factory overhead

Answer 1

	fixed overhead rate
	estimated foh/estimated machine hours
	200,000/5,000
	40	per machine hour
	Actual fixed overhead				240,000
	applied FOH		(40*5,000)		200,000
	FOH under applied				40,000
a)	underapplied
	by
	$40,000
	Journal entry
	Cost of goods sold			DR	40,000
	fixed manufacturing overhead			CR		40,000
	Answer)	option a
		Debit to cost of goods sold