Chapter 3 Job-Order Costing Part 3

Underapplied/Overapplied Overhead the difference between the overhead cost

applied to WIP and actual overhead costs of a period
- If applied overhead > actual overhead = Overapplied
- If applied overhead < actual overhead Underapplied
-

The under/over applied overhead balance remaining in the Manufacturing Overhead

account at the end of a period is treated in one of two ways:
1. Closed out to Cost of Goods Sold
2. Allocated among WIP, Finished Goods, and Cot of Goods Sold accounts in
proportion to the overhead applied during the current period

Closed out to Cost of Goods Sold:

Debit in MOH Credit in MOH

Underapplied Overhead: Overapplied Overhead:

Cost of Goods Sold XXXX MOH XXXX
MOH XXXX Cost of Goods Sold XXXX

Allocated between accounts:

- Determine the amount of overhead that was applied (into WIP) or moved into
Finished Goods or Cost of Goods Sold
- Get a % to Total for each WIP, FG, and COGS
- Multiply this same % to the amount of over or under applied overhead
- Apply these adjustments by Journal Entry from Manufacturing overhead
Example of calculating and allocating $5,000 of underapplied overhead:

Journal entry to allocated the underapplied overhead based on %s above:

Schedule of Cost of Goods Manufactured and Cost of Goods Sold