The Sterling Company applies manufacturing overhead. At the end of the year the following data were available: Actual Manufacturing Overhead $115,000 Estimated Manufacturing Overhead $110,000 Applied Manufacturing Overhead $100,000 The following accounts had the unadjusted balances: Raw Materials Inventory $100,000 Work-in-Process Inventory $100,000 Finished Goods Inventory $100,000 Cost of Goods Sold $300,000 What is the journal entry if the amount is considered material?

Under applied manufacturing overhead should be applied in proportion to unadjusted balances of Work in process, Finished goods, Cost of goods sold, which is $100,000, $100,000, $300,000 or 1:1:3 ⇒ $3000, $3000, $9000

asiegbuemmanuelekee asiegbuemmanuelekee · Answer 2 · 2020-03-03T13:19:44+01:00

Answer:

Work-in-process: $3,000

Finished Goods: $3,000

Cost of Goods Sold: $9,000

Manufacturing Overhead: $15,000

Explanation:

Under applied Manufacturing Overheads = Actual Manufacturing Overheads - Applied Manufacturing Overheads

= $115,000 - $100,000

= $15,000

This Under applied overheads will be allocated in proportion to un-adjusted balances of Work In Process ; Finished Goods; Cost of Goods Sold

The proportion will be $100,000:$100,000:$300,000 = 1:1:3

Therefore,

Amount Applied to Work In Process Inventory = [tex]15,000*\frac{1}{5} =[/tex] $3,000

Amount Applied to Finished Goods Inventory = [tex]15,000*\frac{1}{5} =[/tex] $3,000

Amount Applied to Cost of Goods Sold = [tex]15,000*\frac{3}{5} =[/tex] $9,000

Total = 3,000 + 3,000 + 9,000 = $15,000