Hults Corporation has provided data concerning the company's Manufacturing Overhead account for the month of November.Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold,the total of the debits to the Manufacturing Overhead account was $75,000 and the total of the credits to the account was $57,000.Which of the following statements is true?

Question

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The company's Manufacturing Overhead account has a balance of $18,000 that has not yet been applied to Work in Process, Finished Goods, or Cost of Goods Sold. Therefore, manufacturing overhead for the month was underapplied by $18,000. The fact that the total of the debits ($75,000) exceeds the total of the credits ($57,000) means that the initial estimate of manufacturing overhead applied to Work in Process was too high, causing an overapplied balance. The overapplied balance will be closed to Cost of Goods Sold, reducing the cost of goods sold and increasing net income.

Hults Corporation Has Provided Data Concerning the Company's Manufacturing Overhead