Question - Sim's Fabricating Company is a new company that needs to make a decision about the method to use in adjusting cost of goods sold. Because the company used a budgeted indirect-cost rate for its manufacturing operations, the amount that was allocated ($200 000) was different from the actual amount incurred ($225 000).
Ending balances in the relevant accounts were:
Work-in-process $10000
Finished Goods 20000
Cost of Goods Sold 170000
What is the correct journal entry to prorate the write off of the difference between allocated and actual overhead using the pro-rata approach?