Indooroopilly Corporation Applies Overhead Based Upon Machine-Hours Required
A

question 77

Essay

Indooroopilly Corporation applies overhead based upon machine-hours.Budgeted factory overhead was $266 400 and budgeted machine-hours were 18 500.Actual factory overhead was $287 920 and actual machine-hours were 19 050.Before disposition of under/overapplied overhead,the cost of goods sold was $560 000 and ending inventories were as follows:
$$\begin{array} { l r } \text { Direct materials } & \$ 60000 \\\text { WIP } & 190000 \\\text { Finished goods } & \underline { 250000 } \\\text { Total } & \underline { \$ 500000}\end{array}$$
Required
a.Determine the budgeted factory overhead rate per machine-hour.
b.Compute the over/underapplied overhead.
c.Prepare the journal entry to dispose of the variance using the write-off to cost of goods sold approach.
d.Prepare the journal entry to dispose of the variance using the proration approach.
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Definitions:

Product Line

A group of related products under a single brand sold by the same company.

Lifecycle

Describes the stages through which a product, service, or entity passes, typically encompassing introduction, growth, maturity, and decline.

Time to Break-Even

The period it takes for a business or investment to recover its initial costs and start generating profit.

Business Analysis

The practice of identifying business needs and determining solutions to business problems, often involving the analysis of data and processes.