At the end of the year, Easton Company had a balance in Manufacturing Overhead of $23,000, and a balance in Manufacturing Overhead Applied of $26,000. When the Manufacturing Overhead account is closed, the Cost of Goods Sold account will:

Question

Quizplus · Accepted Answer

The balance in Manufacturing Overhead Applied is greater than the balance in Manufacturing Overhead at the end of the year, indicating that more overhead was applied to production than was actually incurred. This suggests that there is an overapplied overhead balance, which will decrease Cost of Goods Sold when the Manufacturing Overhead account is closed. Therefore, the correct answer is B, as Cost of Goods Sold will decrease by the amount of overapplied overhead, in this case, $3,000.

At the End of the Year, Easton Company Had a Balance