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:

Supermart

A large retail store, typically a supermarket or hypermarket, selling a wide variety of goods.

Professional Negligence

The failure of a professional to perform their responsibilities to the required standard of skill and care, leading to client harm or loss.

Legislatures

Law-making bodies in a government that create, amend, and enact laws.

Courts

Institutions vested with the power to administer justice by interpreting and applying laws.