Q. 11SE - Horngren'S Financial And Managerial Accounting

Question

Justice Company’s Manufacturing Overhead account is given below. Use this informationto prepare the journal entry to adjust for overallocated or underallocatedoverhead.

                                         Manufacturing overhead

148000

147000

Step-by-Step Solution

Answer

Date	Particulars	Debit ($)	Credit ($)
	Cost of goods sold	1,000
	Manufacturing overhead		1,000

Step 1: Overheads

Overhead expenses means the cost that are not related to labor, direct material, or production.They are more static costs and pertains to general business of the company.

Step 2: Underallocated overhead amount

$$\begin{gathered} \mathbf{Underallocatedoverhead}\mathbf{=}\mathbf{Actualoverhead}\mathbf{-}\mathbf{Allocatedoverhead} \\ \mathbf{=}\mathbf{\$}\mathbf{148}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{\$}\mathbf{147}\mathbf{,}\mathbf{000} \\ \mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{000} \end{gathered}$$

The manufacturing overhead of the company is underallocated because the allocated amount of overhead is less than the actual overhead by the amount of $1,000.