Answer:
(A) $180,000 (B) A journal entry was prepared for over- or under applied overhead to cost of goods sold.
Explanation:
Solution
Now,
Let us recall from the statement from the example as follows:
A company gives an overhead at =1 60% rate
The actual overhead cost for the present period is =1020,000
Direct cost of labor = $525,000
Then,
(a) For the under applied overhead using T account we have the following:
The direct labor cost overhead = 525,000 * 160% (allocated overhead)
=$ 840,000
Thus
The Under applied overhead becomes,
Under applied overhead =The actual overhead - applied overhead
In other words we deduct the actual overhead for applied overhead
=$1020,000 - $840,000 = $180,000
(B) A Journal entry is carried out for the close over or under applied overhead.
Date Particulars Debit Credit
Cost of goods sold A/c $180,000
Manufacturing overheads $180,000
