Dusk Industries produces industrial convection ovens. For the year, management e

Question

Dusk Industries produces industrial convection ovens. For the year, management estimated that total manufacturing overhead would be $2,978,760. Management decided to use direct labor hours to apply manufacturing overhead and budgeted 144,600 direct labor hours. The following information was compiled before an adjustment had been made to close Manufacturing Overhead Control:

Actual direct labor hours worked 145,360

Actual overhead incurred $3,062,590

Finished Goods Inventory $525,600

Cost of Goods Sold $4,864,000

If Dusk closes the entire amount of under-or overapplied overhead to Cost of Goods Sold, what was the ending balance in that account?

Explanation / Answer

Predetermined overhead rate = 2978760/144600= $20.6 Manufacturing Overhead applied = 20.6*145360= $2994416 Underapplied overhead = 3062590-2994416 = $68174 Ending balance in Cost of Goods Sold = 4864000+68174= $4932174

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