Moira Company Has Just Finished Its First Year of Operations

question 101

Essay

Moira Company has just finished its first year of operations and must decide which method to use for adjusting cost of goods sold.Because the company used a budgeted indirect-cost rate for its manufacturing operations,the amount that was allocated ($435,000)to cost of goods sold was different from the actual amount incurred ($425,000).
Ending balances in the relevant accounts were:
$$\begin{array} { l r } \text { Work-in-Process } & \$ 40,000 \\\text { Finished Coods } & 80,000 \\\text { Cost of Goods Sold } & 680,000\end{array}$$ Required:
a.Prepare a journal entry to write off the difference between allocated and actual overhead directly to Cost of Goods Sold.Be sure your journal entry closes the related overhead accounts.
b.Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances.Be sure your journal entry closes the related overhead accounts.

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Definitions:

CD-50

A classification of heavy-duty gear oil, with "CD-50" indicating the oil's viscosity and performance characteristics according to specific standards.

Pinion Bearing Preload

The amount of force applied to pinion bearings, controlling how tightly they fit, influencing gear meshing and noise.

Thicker Spacer

A broader component used to create distance or fill gaps between objects in various applications.

Thinner Spacer

A slim component used to create or adjust the space between two parts, often in machinery, to ensure proper clearance or alignment.