Question

Required information The following information applies to the questions displayed below.) Midnight Sun Apparel Company uses normal costing, and manufacturing overhead is applied to work-in-process on the basis of machine hours. On January 1 of the current year, there were no balances in work-in-process or finished goods Inventories. The following estimates were included in the current year's budget. Total budgeted manufacturing overhead Total budgeted machine hours $ 235,000 47,000 During January, the firm began the following production jobs: A79: 1,000 machine hours NO8: 2,500 machine hours P82: 500 machine hours During January, job numbers A79 and NO8 were completed, and job number A79 was sold. The actual manufacturing overhead incurred during January was $26,000. 5. Prepare a journal entry to prorate the balance calculated in requirement (3) among the Work-in-Process Inventory. Finished-Goods Inventory, and Cost of Goods Sold accounts. (Do not round Intermediate calculations. If no entry is required for a transaction/event select "No journal entry required in the first account field.) View transaction list Journal entry worksheet

Answer 1

Step 1 )Overhead Rate= Estimated overhead /Estimated machine hour

                                   = 235000 / 47000

                                    = $ 5 Per Machine hours

Step 2 )Calculation of Applied overhead and under-applied/Over -applied overhead

	Overhead Applied					% of applied overhead to jobs to total applied overhead
Job	Actual Hours	*	Overhead Rate	=	Applied Overhead
A79	1000		5		5000	5000/20000= .25 or 25%
N08	2500		5		12500	12500/20000 = .625 or 62.5%
P82	500		5		2500	2500/20000 = .125 or 12.5%
Total	4000				20000	100%

Under -applied overhead =Actual - Applied overhead

                                    = 26000 -20000

                                     = 6000

Step 3)

Date	Account title	Debit	credit
5	Work in process inventory (6000*25%)	1500
	Finished goods inventory (6000*62.5%)	3750
	Cost of goods sold (6000*12.5%)	750
	Manufacturing overhead		6000
	[Being under-applied overhead prorated to jobs]

**Under-applied overhead * % of applied overhead to jobs to total applied overhead (calculated in step 2)