Question: Winston Manufacturing uses direct labor cost to apply overhead to its production. The budgeted direct labor cost and budgeted manufacturing overhead were $400,000 and $480,000, respectively. The following cost data were experienced last year:
Material inventory, 1/1/04 $ 10,000
Material inventory, 12/31/04 2,000
Work-in-process, 1/1/04 12,000
Finished goods, 1/1/04 33,000
Finished goods, 12/31/04 23,000
Purchases of material 61,000
Direct labor incurred 45,000
Indirect material 13,000
Indirect labor 12,000
Other manufacturing overhead 20,000
Unadjusted cost of goods sold 170,000
REQUIRED: 1. Close the over/under applied overhead to cost of goods sold (journal entry).
2. Prorate the over/under applied overhead to the proper accounts using the ending account balances for prorating (journal entry).
3. Prepare a cost of goods manufactured statement.