Question

Lauren Fine Clothing manufactures clothes for professional women. Lauren applies overhead at the rate of $15 per direct labor hour. During April, the company has budgeted 9,420 direct labor hours. At the end of April, 9,200 direct labor hours and $132,670 in manufacturing overhead had been incurred. To adjust for the difference between applied and incurred overhead, which journal entry would the firm record (using the pro-rated approach) given the following ending balances:

Answer 1

Answer: Debit MOH and credit cost if goods sold by 5330.

Step-by-step explanation:

From the question, we are given the following information:

Overhead rate = $15 per direct labor hour

Direct labor hour incurred = 9,200

Manufacturing overhead cost incurred $132,670

We will then calculate the value for the applied manufacturing overhead which will be the direct labor hour incurred multiplied by the predetermined overhead rate. This will be:

= 9,200 x 15

= $138,000

Then, we have to calculate the overapplied manufacturing overhead which will be:

= $138,000 - $132,670

= $5,330

The journal entry will then be:

Debit: Manufacturing overhead (MOH) $5330

Credit: Cost of goods sold $5330