Michael Paints has two processes-Coloring Department and Mixing Department. Mich
ID: 2417435 • Letter: M
Question
Michael Paints has two processes-Coloring Department and Mixing Department. Michael sold 450 gallons on account at $110 per gallon. The total cost of processing was $385,000 for 5,500 gallons of paint. Throughout the year, Michael used a predetermined overhead allocation rate to allocate $80,000 and $90,000 of indirect costs to the Coloring Department and Mixing Department, respectively. The actual overhead costs incurred amounted to $150,000 at the end of the year. What are the journal entries to record the sale of goods and the adjustment for over/underallocated manufacturing overhead at the end of the year if Michael follows a process costing system?Explanation / Answer
Item Account description Debit Credit 1 Cash $49,500 Sales $49,500 2 Overheads-Coloring department $80,000 Overheads-Mixing department $90,000 Overheads $170,000 Being over heads allocated) 3 Over Overhead recovery $20,000 Overheads-Coloring department $9,412 Overheads-Mixing department $10,588