At the end of the year,Metro Inc.has an unadjusted credit balance in the Manufacturing Overhead account of $950.Which of the following is the year-end adjusting entry needed to clear the balance to zero?

Question

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The unadjusted credit balance in the Manufacturing Overhead account represents overapplied overhead, which means that actual overhead costs were less than the amount allocated to products based on the estimated overhead rate. To clear the balance to zero, the Manufacturing Overhead account needs to be debited for the amount of overapplied overhead ($950) and another account needs to be credited for the same amount. Since the overapplied overhead was not absorbed into the cost of goods sold during the year, it should be credited to Cost of Goods Sold, reducing the net income for the period. Therefore, the adjusting entry should be: debit Manufacturing Overhead $950 and credit Cost of Goods Sold $950. Options A and B are incorrect because Finished Goods Inventory is not involved in the adjustment. Option D is incorrect because it reverses the entry for underapplied overhead, not overapplied overhead.

At the End of the Year,Metro Inc