Before prorating the manufacturing overhead costs at the end of 2020, the Cost of Goods Sold and Finished Goods Inventory accounts had applied overhead costs of $59,300 and $38,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $92,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $97,300 at the end of 2020. If the under or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be allocated to the Finished Goods Inventory

Question

Business

Collin Murphy

20 December, 03:18

Before prorating the manufacturing overhead costs at the end of 2020, the Cost of Goods Sold and Finished Goods Inventory accounts had applied overhead costs of $59,300 and $38,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $92,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $97,300 at the end of 2020. If the under or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be allocated to the Finished Goods Inventory

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Answers (1)

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Pierce Gray · Answer 1

The over applied overhead which is allocated to finished goods inventory is $ 1,488.54

Explanation:

Determination of over or under applied overhead

Applied Manufacturing overhead $ 97,300

Actual factory overhead incurred $ 92,000

Overapplied manufacturing overhead $ 5,300

Allocation of over applied overhead is on basis of values in Cost of goods sold and Finished goods inventory.

Cost of goods Sold $ 59,300

Finished Goods inventory $ 38,000

Sum of COGS and Inventory $ 97.300

Over applied Overhead $ 5,300

Allocation Finished Goods inventory

$38,000 / $ 97,300 * $ 5,300 = $ 1,488,54

Allocation Cost of Goods sold

$ 59.300 / $ 97,300 * $ 5,300 = $ 3.811.46