Chapter 3, Problem 12P

PROBLEM 3-12 Predetermined Overhead Rate; Disposing of Under applied or over appliedoverhead
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Luzadis Company makes furniture using the latest automated technology .The company uses a job-order costing system ad applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate based on a cost formula that estimates $900,000 of total manufacturing overhead for an estimated activity level of 7000 machine-hours.
During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records overhead the following actual cost Cid operating data for the year
Required:
1. Compute the under applied or over applied overhead.
2. Assume that the comp,' closes any under applied or over applied overhead to Cost of Goods Sold Prepare the appropriate journal entry.
3. Assume that the company allocates under applied or over applied overhead proportionally to Work in Process, Finished Goods Cost of Goods Sold Prepare the appropriate journal
4 Finished Goods, Id Cost being closed to Cost of Goods Sold?