Carlson Corporation Applies Overhead Based Upon Machine-Hours Required:
A

Carlson Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:
$$\begin{array} { l r } \text { Direct materials } & \$ 60,000 \\\text { WIP } & 190,000 \\\text { Finished goods } &\underline{ 250,000 }\\\text { Total}&\underline{ \$ 500,000 }\\\end{array}$$
Required:
a. Compute the amount of overhead applied to production.
b. Prepare the journal entry to dispose of the over/underapplied overhead using the write-off to cost of goods sold approach.
c. Prepare the journal entry to dispose of the over/underapplied overhead using the proration approach.

Correct Answer:

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(a)$274,320
Overhead Rate = $266,400/18,...

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