EXERCISE 3-14 (15 MINUTES)

3. The underapplied overhead will have to be allocated to the other ac-

counts on the basis of the overhead applied during the year in the end-

ing balance of each account:

Work in Process ... $ 19,500 5 %

Finished Goods... 58,500 15

Cost of Goods Sold ... 312,000 80

Total cost ... $390,000 100 %

Using these percentages, the entry would be as follows:

Work in Process (5% × $70,000) ... 3,500

Finished Goods (15% × $70,000)... 10,500

Cost of Goods Sold (80% × $70,000) ... 56,000

Manufacturing Overhead ... 70,000

© The McGraw-Hill Companies, Inc., 2006. All rights reserved.

Solutions Manual, Chapter 3 85