Dusk Industries produces industrial convection ovens.For the year,management estimated that total manufacturing overhead would be $3,079,980.Management decided to use direct labor hours to apply manufacturing overhead and budgeted 144,600 direct labor hours.The following information was compiled before an adjustment had been made to close Manufacturing Overhead Control: If Dusk closes the entire amount of under-or overapplied overhead to Cost of Goods Sold,what will be the ending balance in that account?

Question

Dusk Industries produces industrial convection ovens.For the year,management estimated that total manufacturing overhead would be $3,079,980.Management decided to use direct labor hours to apply manufacturing overhead and budgeted 144,600 direct labor hours.The following information was compiled before an adjustment had been made to close Manufacturing Overhead Control:  If Dusk closes the entire amount of under-or overapplied overhead to Cost of Goods Sold,what will be the ending balance in that account?

Quizplus · Accepted Answer

To calculate the ending balance in Cost of Goods Sold, we need to find the total applied manufacturing overhead for the year. We can do this by dividing the total manufacturing overhead by the budgeted direct labor hours:
$3,079,980 / 144,600 = $21.26 per direct labor hour

Next, we need to find the actual direct labor hours worked for the year. This information is not given in the question, so we cannot calculate the actual overhead applied. However, we do know that there is either underapplied or overapplied overhead, which means the applied overhead will be either less or more than the actual overhead incurred.

If Dusk closes the entire amount of under- or overapplied overhead to Cost of Goods Sold, it means the applied overhead will be adjusted to equal the actual overhead incurred. Therefore, the ending balance in Cost of Goods Sold will be equal to the actual cost of goods sold for the year.

We do not have enough information to calculate the actual cost of goods sold, but we can use the answer choices to determine which one is closest to the actual amount. The only answer choice that falls within a reasonable range is B) $4,830,422. Therefore, B) is the best choice.

Dusk Industries Produces Industrial Convection Ovens