Smith Company has the following selected debit balance accounts at the end of the current year: Work-in-Process, $25,000; Finished Goods, $12,500; Cost of Goods Sold, $37,500; and Factory Overhead, $6,000.The pro-rated amount charged to Cost of Goods Sold for factory overhead will be

Question

Quizplus · Accepted Answer

The factory overhead is applied to Work-in-Process, and then it is charged to Finished Goods through the Cost of Goods Sold. The total amount of factory overhead applied would be:

Factory Overhead = $6,000
Total Debit Balance in WIP and FG accounts = $25,000 + $12,500 = $37,500
Pro-rated amount charged to each dollar of WIP and FG accounts = Factory Overhead/Total Debit Balance in WIP and FG accounts = $6,000/$37,500 ≈ 0.16

Therefore, the amount charged to Cost of Goods Sold for factory overhead would be:

Cost of Goods Sold = (Work-in-Process + Finished Goods) x Prorated amount
Cost of Goods Sold = ($25,000 + $12,500) x 0.16 = $6,000

Hence, the correct answer is option B, which is $3,000.

Smith Company Has the Following Selected Debit Balance Accounts at the End