Fourth, the final step of juxtaposing actual overhead and applied overhead at the end of the period to determine the difference and then closing overapplied or underapplied overhead can be a challenge.
An active learning approach incorporates input from students as to which accounts overapplied or underapplied overhead should be closed.
Work-in-Process Finished Goods Cost of Goods Sold 281,000 800,000 800,000 500,000 500,000 459,000 510,000 450,000 300,000 500,000 Ending balances: Work-in-Process $ 450,000 [$450,000 / $1,250,000] x $33,000 = $11,880 Finished Goods 300,000 [$300,000 / $1,250,000] x $33,000 = $ 7,920 Cost of Goods Sold 500,000 [$500,000 / $1,250,000] x $33,000 = $13,200 $ 1,250,000 Note that one way to check for accuracy and especially for a rounding problem is to determine if the total amount of overhead prorated to the three appropriate accounts ($11,880 + $7,920 + $13,200) equals the total underapplied overhead of $33,000.
