Answer:
Subapplication of 22,500
journal entry:
WIP 4,500 debit
finished goods 2,250 debit
COGS 15,750 debit
factory overhead 22,500 credit
Explanation:
Direct Labor cost during the year:
60,000 + 30,000 + 210,000 = 300,000 direct labor
<u></u>
<u>Applied overhead:</u>
cost driver x predetermined rate
300,000 x 150% = 450,000
Actual overhead: 472,500
Subapplication of 22,500
as this is a significant amount we must adjust the WIP inventory, cost of goods sold and fnished goods inventory
to know the adjustment on each account we calcualte each account percentage:
300,000 --> 22,500
60,000 --> 60,000/300,000 x 22,500 = 4,500 endingWIP
30,000 --> 30,000/300,000 x 22,500 = 2,250 finished goods
210,000--> 210,000/300,000 x 22,500 = 15,750 COGS
we do the adjuting entry to increase overhead and transfer into each concept
