verhead Variances and Their Disposal

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Warner Company has the following data for the past year:

Actual overhead	$528,000
Applied overhead:
Work-in-process inventory	$112,000
Finished goods inventory	224,000
Cost of goods sold	224,000
Total	$560,000

Warner uses the overhead control account to accumulate both actual and applied overhead.

Required:

1. Calculate the overhead variance for the year. $fill in the blank 95588302ff82022_1 Overapplied

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Correct

Provide the appropriate adjusting journal entry to close the overhead variance to Cost of Goods Sold.

	Overhead Control	fill in the blank 58c3fafcc05b032_2
	Cost of Goods Sold		fill in the blank 58c3fafcc05b032_4

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Actual OH - Applied OH = Over/Underapplied. If variance is not material, it is closed out to cost of goods sold.

2. Assume the variance calculated is material. After prorating, close the variances to the appropriate accounts. If an amount box does not require an entry, leave it blank.

	Overhead Control	fill in the blank b1533cfd6f8bfd0_2	fill in the blank b1533cfd6f8bfd0_3
	Cost of Goods Sold	fill in the blank b1533cfd6f8bfd0_5	fill in the blank b1533cfd6f8bfd0_6
	Work-in-Process Inventory	fill in the blank b1533cfd6f8bfd0_8	fill in the blank b1533cfd6f8bfd0_9
	Finished Goods Inventory	fill in the blank b1533cfd6f8bfd0_11	fill in the blank b1533cfd6f8bfd0_12

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Assume the variance calculated is material. After prorating, provide the final ending balances of these accounts.

	Unadjusted Balance		Prorated Overapplied Overhead		Adjusted Balance
Work-in-Process Inventory	$112,000		$fill in the blank 36027f03d059006_1		$fill in the blank 36027f03d059006_2
Finished Goods Inventory	$224,000		$fill in the blank 36027f03d059006_3		$fill in the blank 36027f03d059006_4
Cost of Goods Sold	$224,000		$fill in the blank 36027f03d059006_5		$fill in the blank 36027f03d059006_6

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If variance is material, it is prorated among Work in Process, Finished Goods, and Cost of Goods Sold.

3. What if the variance is of the opposite sign calculated in Requirement 1? Provide the appropriate adjusting journal entries for Requirements 1 and 2. For a compound transaction, if an amount box does not require an entry, leave it blank.

Variance immaterial		fill in the blank 844e0902103b029_2
			fill in the blank 844e0902103b029_4
Variance material		fill in the blank 844e0902103b029_6	fill in the blank 844e0902103b029_7
		fill in the blank 844e0902103b029_9	fill in the blank 844e0902103b029_10
		fill in the blank 844e0902103b029_12	fill in the blank 844e0902103b029_13
		fill in the blank 844e0902103b029_15	fill in the blank 844e0902103b029_16

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If the variance is of the opposite sign, all entries in Requirement 1 & 2 will be reversed. What were debits will be credits and what were credits will be debits.