2) Prepare the journal entry to close the amount of underapplied or overapplied

Question

2)

Prepare the journal entry to close the amount of underapplied or overapplied overhead to Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3) Assume that Job P includes 20 units that each sell for $5,000 and that the company’s selling and administrative expenses in March were $10,000. Prepare an absorption costing income statement for March.

  

Prepare the journal entry to close the amount of underapplied or overapplied overhead to Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3) Assume that Job P includes 20 units that each sell for $5,000 and that the company’s selling and administrative expenses in March were $10,000. Prepare an absorption costing income statement for March.

Foundational [LO3-1, LO3-2, LO3-3, LO3-4, L03-5, LO3-6, LO3-7 [The following information applies to the questions displayed below.] Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March-Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Estimated total fixed manufacturing overhead Estimated variable manufacturing overhead per direct labor-hour Estimated total direct labor-hours to be worked Total actual manufacturing overhead costs incurred $14,800 $1.60 3,700 $21,000 Direct materials Direct labor cost Actual direct labor-hours worked Job PJob Q $ 21,500 $ 9,700 $44,800 $12,000 2,800750

Explanation / Answer

Total fixedmanufacturing overhead = $14,800 Direct labour hours 3700 hours Fixed overhead absorption rate =Total fixed overheads / labour hours                                                                    ( 14800 /7400 ) = $ 4 per labour hour Variable overhead rate per hour $ 1.60 per hour Total Overhead rate per labour hour $ 5.60 (4+1.60) Req 1: Total labour hours (2800+750) = 3550 hours Total actual manufacturing overheads incurred   $ 21,000 Less: Overheads absorbed (3550 hours@5.60)       $ 19,880 Overheads underapplied                                                 $ 1,120 Req 2: Journal entry for underapplied overheads Cost of Goods sold Control A/c Dr. 1120 Manufacturing overheads Control Cr. 1120 Req 3: Income Statement for Job P Direct material 21500 Direct Labour cost 44800 Prime cost 66300 Add: factory overheads (2800 hours @5.60) 15680 Cost of Production 81980 Add: Selling and Admin overheads 10000 Cost of Sales 91980 Sales (20 units @5000) 100,000 Net operating income 8,020

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