Aspen Company estimates its manufacturing overhead to be $642,500 and its direct labor costs to be $514,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $190,124. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $360,580. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $104,896. Actual manufacturing overhead for year 2 was $805,500. Manufacturing overhead is applied on the basis of direct labor costs. Required:

Prepare an entry to allocate over - or underapplied overhead to Work in Process, Finished Goods and Cost of Goods Sold.

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Business

Jameson

13 September, 08:49

Aspen Company estimates its manufacturing overhead to be $642,500 and its direct labor costs to be $514,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $190,124. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $360,580. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $104,896. Actual manufacturing overhead for year 2 was $805,500. Manufacturing overhead is applied on the basis of direct labor costs. Required:

Prepare an entry to allocate over - or underapplied overhead to Work in Process, Finished Goods and Cost of Goods Sold.

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Quinn Dyer · Answer 1

WIP inventory 904.91 debit

Finished goods 67.868,16 debit

COGS 35.239,43 debit

Factory overhead 104,012.5 credit

Explanation:

overhead rate_

642,500 / 514,000 = 1.25

labor cost

190,124 x 1.25 = 237.655‬ weight 33.88%

360,580 x 1.25 = 450.725‬ weight 65.25%

10,486 x 1.25 = 13.107,5‬ weights 0.87%

total overhead 701.487,5‬

actual overhead 805,500

over-allocated: 104.012,5‬

we debit all this concepts as they were understated and credit the applied overheas as it was under allocated.