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Prepare a journal entry to close off the balance

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Reference no: EM132979959

XYZ Ltd incurred $500 000 of manufacturing overhead costs during the financial year 2019. However, only $400 000 of overhead was applied to production.

At the end of the financial year, the following amounts of the applied overhead remained in the various manufacturing accounts:

Work in process inventory $80,000

Finished goods inventory 100,000

Cost of goods sold 220,000

Required:

Problem a) Explain whether the overhead cost was overapplied or underapplied to production. Determine the amount.

Problem b) Show your calculation to prorate the amount calculated in (a) above, to the three manufacturing accounts.

Problem c) Prepare a journal entry to close off the balance in the manufacturing overhead account.

Problem d) What would be the effect on profit if the alternative method of closing off overhead were used?

Reference no: EM132979959

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