Answer:
Please see below
Explanation:
With regards to the above, we need to compute first the predetermined overhead rate in order to ascertain whether it is over or under applied overhead
Predetermined overhead rate = Estimated overhead cost / Direct labor cost
= $115,500 / $125,300
= 0.92
We can now compute the under or over applied overhead as seen below;
= Actual direct labor cost × predetermined overhead rate - Actual overhead
= $118,000 × 0.92 - $107,700
= $108,560 - $107,700
= $860
Because the above amount is positive, is over applied overhead and the journal entry would be;
Manufacturing overhead account Dr $860
To Costs of goods sold account Cr $860
(Being over applied overhead closed)
