Question

Refer to the information in Exercise 2-13.
In Exercise 2-13, During the month of August, Star Plastics applied overhead to jobs using an overhead rate of $3 per dollar of direct labor, direct labor in August was $90,000. Actual overhead in August was $230,000. Assume that actual overhead was composed of the following items.
Indirect materials.......... $30,000
Indirect labor ............ 70,000
Utilities ............... 20,000
Depreciation ............. 60,000
Repair expense ............ 50,000
Total ................ $230,000

Required
a. Determine the balance in manufacturing overhead, and prepare a journal entry to close the balance to cost of goods sold.
b. Why is it important to close the balance in manufacturing overhead?
c. Assume that Star Plastics uses a JIT inventory system. What is the justification for assigning the balance in manufacturing overhead to Cost of Goods Sold rather than apportioning it to Work in Process, Finished Goods, and Cost of Goods Sold?



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  • CreatedSeptember 12, 2013
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