Assume the following at the end of 2010 (in thousands): Cost of goods sold ..........................................$300 Direct materials
Question:
Assume the following at the end of 2010 (in thousands):
Cost of goods sold ..........................................$300
Direct materials inventory .................................70
Work-in-process ..................................................50
Finished goods ...................................................150
Factory department overhead control .........60 cr.
1. Assume that the under applied or over applied overhead is regarded as an adjustment to cost of goods sold. Prepare the journal entry.
2. Assume that the under applied or over applied overhead is prorated among the appropriate accounts in proportion to their ending un-adjusted balances. Show computations and prepare the journal entry.
3. Which adjustment, the one in requirement 1 or 2, would result in the higher gross profit? Explain, indicating the amount of the difference.
Step by Step Answer:
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu