Gary Company Had the Following Balances as of December 31

question 87

Essay

Gary Company had the following balances as of December 31, 20X5: $\begin{array}{ll}\text { Cost of goods sold } & \$ 250,000 \\\text { Direct-materials inventory } & 50,000 \\\text { WIP inventory } & 170,000 \\\text { Finished goods inventory } & 80,000 \\\text { Factory dep artment overhead control } & 25,000 \text { Credit }\end{array}$ Required:
a. Does the variance represent overapplied or underapplied overhead?
b. Prepare the entry to dispose of the variance using the proration method.
c. What effect, if any, did the entry in part b. have on gross profit?

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Definitions:

Trade Restrictions

Government-imposed limitations on the free exchange of goods and services between countries, including tariffs, quotas, and embargoes, often to protect domestic industries.

American Employment

Refers to the state of having a job or occupation within the United States, often analyzed in terms of employment rates, job creation, and labor market trends.

Importation

The process of bringing goods or services into one country from another for the purpose of trade.

Trade Freely

The ability to exchange goods and services without restrictive regulations, tariffs, or quotas, enabling a more efficient allocation of resources globally.