Answer:
The results are below.
Explanation:
<u>First, we need to calculate the predetermined overhead rate:</u>
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 481,250 / 35,000
Predetermined manufacturing overhead rate= $13.75 per direct labor hour
<u>Now, we allocate overhead based on actual hours:</u>
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 13.75*40,000
Allocated MOH= $550,000
<u>Finally, the under/over applied overhead and the closing to cost of goods sold:</u>
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 644,000 - 550,000
Underapplied overhead= $94,000
When overhead is underapplied, we need to debit the cost of goods sold.
COGS 94,000
Manufacturing overhead 94,000
