Wang's Corporation Applies Overhead Based Upon Machine-Hours $$\begin{array} { l r } \text { WIP } & \$ 150,000 \\\text { Finished goods } & 375,000 \\\text {Total } & \$ 525,000 \\\end{array}$$

Wang's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000. Actual factory overhead was $312,330 and actual machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold was $725,000 and ending inventories were as follows:
$$\begin{array} { l r } \text { WIP } & \$ 150,000 \\\text { Finished goods } & 375,000 \\\text {Total } & \$ 525,000 \\\end{array}$$
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)$316,500
Overhead Rate = $325,000/13,...

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