Martin Corp. applies overhead based on machine hours. Budgeted factory overhead is $275,000 and budgeted machine...

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Martin Corp. applies overhead based on machine hours. Budgetedfactory overhead is $275,000 and budgeted machine hours were19,000. Actual factory overhead was $270,000 and actual machinehours were 19,100. Before disposition of under/overappliedoverhead, cost of goods sold was $500,000 and ending inventorieswere as follows:
Direct materials50,000
WIP200,000
Finished Goods300,000
Total550,000
Determine the budgeted factory overhead rate per machinehour
Compute the over/underapplied overhead
Prepare the journal entry to dispose of the variance using thewrite-off to cost of goods sold approach
Prepare the journal entry to dispose of the variance using theproration approach.

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4.0 Ratings (525 Votes)

Determine the budgeted factory overhead rate per machine hour

budgeted factory overhead rate per machine hour

= budgeted factory overhead/ Machine Hour

=275,000/19000

=$14.47 per machine Hour

____________________________________________

Compute the over/underapplied overhead

Applied OH

=$14.47*19100 machine hour

over/under applied overhead

=Applied -Actual

=14.47*19100-270,000

=276377-270,000

=6377 Over applied

____________________________________________

Prepare the journal entry to dispose of the variance using the write-off to cost of goods sold approach


Journal	Debit $	Credit $
Factory department Overhead control	6377
Cost of goods sold		6377

__________________________________________________

4Prepare the journal entry to dispose of the variance using the proration approach.

500,000+200,000+300,000

=1,000,000

Cost of goods sold

=500,000/1,000,000=50%x6377=$3189

WIP

=200,000/1,000,000=20%x6377=$1275

Finished goods

=300,000/1,000,000=30%x6377=$1913


Journal	Debit $	Credit $
Factory department Overhead control	6377
Cost of goods sold		3189
WIP inventory		1275
Finished Goods inventory		1913

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