The Following Account Appears in the Ledger After Only Part

question 120

Short Answer

The following account appears in the ledger after only part of the postings have been completed for July, the first month of the current fiscal year:
Factory overhead is applied to jobs at the rate of 60% of direct labor cost. The actual factory overhead incurred for July was $75,000. Jobs completed during the month totaled $301,200.
(a) Prepare the journal entries to record
(1) the application of factory overhead to production during July
(2) the jobs completed during July.
(b) What is the balance of the factory overhead account on July 31?
(c) Was factory overhead overapplied or underapplied on July 31?
(d) Determine the balance of Work in Process on July 31.

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Definitions:

Controllable Overhead Variance

Controllable overhead variance is the difference between the actual overhead costs incurred and the budgeted overhead costs that could be controlled.

Overhead Applied

The portion of overhead costs allocated to specific jobs or production activities based on a predetermined formula or rate.

Overhead Volume Variance

The difference between the budgeted and actual overhead costs due to changes in the level of production or activity.

Total Overhead Variance

The difference between the actual overhead costs incurred and the overhead costs that were budgeted or applied based on a standard cost system.