Faughn Corporation has provided the following data concerning manufacturing overhead for July: The company's Cost of Goods Sold was $243,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?
A) Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000
B) Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000
C) Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $253,000
D) Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $253,000

Question

Faughn Corporation has provided the following data concerning manufacturing overhead for July:  The company's Cost of Goods Sold was $243,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?
A) Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000 
B) Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000 
C) Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $253,000 
D) Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $253,000

Quizplus · Accepted Answer

The total manufacturing overhead cost incurred in July was $253,000 ($180,000 actual + $73,000 applied). However, the Manufacturing Overhead account was closed out to Cost of Goods Sold with a balance of $263,000 ($253,000 actual + $10,000 overapplied). Therefore, Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000 ($243,000 - $10,000 overapplied).

Faughn Corporation Has Provided the Following Data Concerning Manufacturing Overhead