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Unformatted text preview: Week 2: Systems Design: Job-Order Costing Week 2 Skill Building Demonstration Problem 8 Compute underapplied or overapplied overhead cost and prepare the journal entries to close the balance in Manufacturing Overhead to the appropriate accounts. Learning Objective 8 Underapplied and Overapplied Overhead Since the predetermined overhead rate is established before the period begins and is based on estimated data, the amount of overhead cost applied to Work in Process will generally be different from the actual amount of overhead cost incurred. The difference between the amount of overhead cost applied to Work in Process and overhead cost actually incurred is called underapplied or overapplied overhead. Definitions Overhead cost is said to be underapplied when the applied cost is less than the actual cost. Applied Cost < Actual Cost Manufacturing Overhead Actual Applied Overhead 25,000 20,000 Overhead Costs 5,000 Costs Formulas Journal Entry to remove underapplied overhead Cost of Goods Sold...............$5,000Cost of Goods Sold....
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This note was uploaded on 04/21/2011 for the course ACTG 211 taught by Professor Staff during the Spring '08 term at Ill. Chicago.
- Spring '08
- Managerial Accounting