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 costs for July were $253,000 ($100,000 + $60,000 + $50,000 + $43,000). However, only $243,000 was allocated to products during the month. This means that manufacturing overhead was overapplied by $10,000 ($253,000 - $243,000). When the Manufacturing Overhead account is closed out to Cost of Goods Sold, it will reduce the Cost of Goods Sold by $10,000. Therefore, the Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000 ($243,000 - $10,000). 11ea7998_5f07_fbf4_911b_b39168bda102_TB2627_00_TB2627_00 Adjusted cost of goods sold = Unadjusted cost of goods sold + Underapplied manufacturing overhead - Overapplied manufacturing overhead = $243,000 + $0 - $10,000 = $233,000

Faughn Corporation Has Provided the Following Data Concerning Manufacturing Overhead