Exercise 7-28 Prorate Over- or Underapplied Overhead (LO 7-3)

Aspen Company estimates its manufacturing overhead to be $510,000 and its direct labor costs to be $510,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $220,725. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $416,925. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $179,850. Actual manufacturing overhead for year 2 was $827,000. Manufacturing overhead is applied on the basis of direct labor costs.

Required:

Prepare an entry to allocate over- or underapplied overhead to Work in Process, Finished Goods and Cost of Goods Sold.

Journal Entry title options:

1. NO journal entry required

2. Accounts payable

3. Accounts Receivable

4. Applied manufacturing overhead

5. Cost of goods sold

6. Finished goods inventory

7. Inventory

8. Manufacturing overhead control

9. Wages Payable

10. Work-in-process inventory