Baker Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of over- or under-applied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:
Direct Materials.............................................. 60000
WIP............................................................190000
Finished Goods..............................................250000
Total...........................................................500000
Required: a. Compute the amount of overhead applied to production.
b. Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach.
c. Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach.