xx overhead control actual overhead costs are

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Unformatted text preview: ol Actual Overhead costs are recorded as they occur, and are accumulated in the Overhead Control acct Work in Process – Job A (Overhead) Overhead Applied (Allocated) YY XX “Normal” overhead costs are applied to the jobs and included in WIP YY 10 Referring to the previous example (total normal overhead applied = 9,600, and total actual overhead = 12,000), the summary entries, for the period, would be Various Accounts (Accum Dep’n, Wages Payable, etc.) 12,000 Overhead Control Actual Overhead Overhead Applied/Allocated 9,600 12,000 Work in Process (Job A, B, etc) Normal overhead 9,600 ($100/mhr x 96 hrs) Budgeted rate Actual Machine Time 11 There would be an overhead control account and an overhead applied account corresponding to each overhead cost pool. Thus, if a firm had 3 overhead cost pools, there would be 3 overhead control accounts and three overhead applied accounts. What kind of accounts are the Overhead control and applied accounts? Both the overhead control account and the overhead applied accounts are temporary (Work-in-Process) accounts (also, sometimes referred to as nominal accounts) and, as temporary accounts, they are closed at the end of the accounting period. First, the overhead applied account is closed to the overhead control account. Then, the overhead control account is closed. 12 What happens to the over- or under-applied overhead? After the overhead applied account has been closed, the balance in the overhead control account represents the over-applied (credit balance) or under-applied (debit balance) cost. To close the overhead control account, there are two alternatives: 1) Close the account, proportionately, to the Work-in Process Inventory account(s) the Finished Goods Inventory account(s) the Cost of Goods Sold account(s) or 2) Close the account to the Cost of Goods Sold account However, you will only be responsible for the second alternative, closing the account to Cost of Goods Sold. 13 Again, referring to the pr...
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This document was uploaded on 01/24/2014.

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