Managerial Accounting Question. Help, I'm stuck! :S?

Question

Please help me with this question. It is an overapplied manafacturing overhead homework question.

Balance in Bette's Manufacturing Overhead Account on November 10 was $30,000 overapplied.

Other account balances on that date were:

Direct material inventory 80,000
WIP 50,000
Finished Goods 100,000
Cost of Goods Sold 150,000

The overapplied balance is allocated to the appropriate inventory accounts.

REQUIRED:

a) Determine the balance in COGS after the allocation.

b) Prepare the journal entry to write off the overapplied overhead based on the balances in the accounts as shown above.

If you could help me with this answer ASAP, that would be incredibly helpful. Extra points would be awarded for the best answer! :)

- Nathe

Answer 1

An overapplied Manufacturing Overhead a/c would be a favourable variance and a credit balance. The overapplied balance is allocated to the appropriate inventory accounts. My view is nothing should be allocated to direct material inventory cos this is raw materials and no work has commenced on them yet, hence they should not absorb any O/H. I will only allocate the O/H to:
WIP 50,000 (16.67%)
Finished Goods 100,000 (33.33%)
Cost of Goods Sold 150,000 (50%)
Total $300,000 (100%)

So the $30,000 O/H would be applied as follows using the above percentages:
WIP 5,000
Finished Goods 10,000
Cost of Goods Sold 15,000
Total $30,000

a) After the allocation, COGS balance = 150,000 - 15,000 = $135,000

b) Prepare the journal entry to write off the overapplied overhead based on the balances in the accounts as shown above.
Dr Manufacturing Overhead Account 30,000
Cr WIP 5,000
Cr Finished Goods 10,000
Cr Cost of Goods Sold 15,000