Liz's Cosmetics uses a normal cost system and has the following balances at the end of its first year operations.
WIP inventory: $200,000
Finished-goods inventory: 200,000
Cost of goods sold: 400,000
Actual Factory overhead: 413,000
Factory overhead applied: 453,000
Actual overhead is 413,000 and applied is 453,000. This implies overhead is over applied by $40,000 and there will be a credit balance of $40,000 in the overhead account.
1. In the first method, the total amount of over applied overhead is closed to the cost ...
The solution explains the disposition of year-end underapplied overhead.