Question

Problem —At the end of the year, Johnson Manufacturing ended up with a debit balance of $900 in the Manufacturing Overhead account.

1. Was the MO overapplied or underapplied?

2. Show the entry to close the MO account at the end of the year.

3.   Why is the applied Manufacturing Overhead an estimate rather than an actual amount?

Answer 1

Solution 1:

Debit balance in manufacturing overhead account indicated that MOH is underapplied.

Solution 2:

Journal Entries
Event	Particulars	Debit	Credit
1	Cost of goods sold Dr	$900.00
	To Manufacturing overhead		$900.00
	(To close MOH to COGS)

Solution 3:

Because manufacturing overhead is applied on the basis of predetermined overhead rate so that cost standard should be maintained. Difference in applied and actual overhead is closed directly to cost of goods sold.