Overhead Variances and Their Disposal

Warner Company has the following data for the past year:

Actual overhead $$462,000$

Applied overhead:

Work$-$in$-$process inventory $$100,000$

Finished goods inventory $200,000$

Cost of goods sold $200,000$

Total $$500,000$

Warner uses the overhead control account to accumulate both actual and applied overhead.

Required:

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$1.$ Calculate the overhead variance for the year.

$fill in the blank f$8071$dfcc$051$fb$7\_1$

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Partially correct

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Provide the appropriate adjusting journal entry to close the overhead variance to Cost of Goods Sold.

blank

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Actual OH $-$ Applied OH $=$ Over$/$Underapplied$.$ If variance is not material, it is closed out to cost of goods sold.

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$2.$ Assume the variance calculated is material. After prorating, close the variances to the appropriate accounts. If an amount box does not require an entry, leave it blank.

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Partially correct

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Assume the variance calculated is material. After prorating, provide the final ending balances of these accounts.

Unadjusted

Balance Prorated Overapplied

Overhead Adjusted

Balance

Work$-$in$-$Process Inventory $$100,000$ $fill in the blank $32$f$2$b$8029058$f$96\_1$ $fill in the blank $32$f$2$b$8029058$f$96\_2$

Finished Goods Inventory $$200,000$ $fill in the blank $32$f$2$b$8029058$f$96\_3$ $fill in the blank $32$f$2$b$8029058$f$96\_4$

Cost of Goods Sold $$200,000$ $fill in the blank $32$f$2$b$8029058$f$96\_5$ $fill in the blank $32$f$2$b$8029058$f$96\_6$

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If variance is material, it is prorated among Work in Process, Finished Goods, and Cost of Goods Sold.

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$3.$ What if the variance is of the opposite sign calculated in Requirement $1?$ Provide the appropriate adjusting journal entries for Requirements $1$ and $2.$ For a compound transaction, if an amount box does not require an entry, leave it blank.

Variance immaterial

Variance material