Answer:
<em>$903.35 </em><em>will be allocated to the Finished Goods Inventory</em>
Explanation:
<em>The first step is to determine whether or not the overheads were over - applied or under-applied.</em>
Over-applied = Actual Overheads < Applied Overheads
Under Applied = Actual Overheads > Applied Overheads.
In our case,
Actual Overheads :$74,000 < Applied Overheads :$77,500
Thus overheads were Over-applied
The amount of $3,500 was over-applied
<em>The next step is to establish the Weight of Finished Goods Inventory so as to determine the amount of over-applied overheads to be allocated to it.</em>
<em>Inventory Category Cost Weight Allocation</em>
<em>Cost of Goods Sold $57,500 74.19% $2,596.65</em>
<em>Finished Goods Inventory $20,000 25.81% $903.35</em>
<em>Total $77,500 100.00% $3,500.00</em>
<em>Conclusion :</em>
<em>$903.35 will be allocated to the Finished Goods Inventory</em>