Beaver Company has the following account balances after allocating overhead based on the pre-determined application rate of €10 per machine hour:

The work-in-process used 1,000 machine hours. The balance in finished goods was calculated using 1,500 machine hours. Cost of Goods Sold was calculated using 10,000 machine hours. The actual overhead was €115,000.

a. What is the over- or under-absorbed overhead?

b. What are the final account balances for the Work-in-Process, Finished Goods Inventory, and Cost of Goods Sold accounts if the over- or under-absorbed overhead is (1) allocated completely to Cost of Goods Sold, (2) prorated among the three accounts, and (3) allocated based on a recalculation of the application rate using actual data?

Transcribed Image Text:

Work-in-Process Finished Goods Cost of Goods Sold Total 40,000 60,000 300,000 400,000