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Chapter 4. Overhead Disposition. Prepared by Diane Tanner University of North Florida. GL Accounts Used to Accumulate MOH. Two options in GL accounts for manufacturing overhead Use separate accounts for the actual MOH costs and the MOH applied amounts
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Chapter 4 Overhead Disposition Prepared by Diane Tanner University of North Florida
GL Accounts Used to Accumulate MOH • Two options in GL accounts for manufacturing overhead • Use separate accounts for the actual MOH costs and the MOH applied amounts • Assign actual MOH costs to MOH Control • Assign applied MOH costs to Applied MOH • Use one MOH control account to post both actual and applied amounts • Debit side = Actual MOH costs • Credit side = Applied MOH costs
Status of Manufacturing Overhead Control Account at Year-End • Underapplied • If a single MOH control account is used, a debit balance exists • Implies not enough overhead cost was applied • Overapplied • If a single MOH control account is used, a credit balance exists • Indicates too much overhead cost was applied
Disposing of Over/Underapplied MOH Two approaches 1) Write off to CGS • Assumes the over or underapplied amount is immaterial 2) Proration approach • Assumes the over or underapplied amount is material • Prorates to the accounts that contain MOH based on: • The balances of these accounts • The amount of MOH in these accounts
