Question
The following information applies to the overhead account of Churchill Pty Ltd at the end of the financial year: Debits for actual manufacturing overhead =
The following information applies to the overhead account of Churchill Pty Ltd at the end of the financial year:
Debits for actual manufacturing overhead = $520,000
Credits for applied manufacturing overhead = $450,000
Required:
- Is the manufacturing overhead underapplied or overapplied?
- Describe the two possible methods of disposing of the difference between actual and applied overhead.
- Prepare journal entries to dispose of the overhead. Assume 20% of the production is still work-in-process and 15% is finished but unsold. Show journal entries for both possible methods as you have discussed in item 2 above.
- How would the above entries be different if the accounts were as follows:
Actual manufacturing overhead = $450,000
Applied manufacturing overhead = $520,000
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