Spectrum Manufacturing had the following information in its records at the end of the year: What was the balance in Manufacturing Overhead, and when closed what will the effect be on gross margin?
A)$3,000 underapplied, and increase
B)$3,000 overapplied, and increase
C)$3,000 underapplied, and decrease
D)$3,000 overapplied, and decrease

Question

Spectrum Manufacturing had the following information in its records at the end of the year:   What was the balance in Manufacturing Overhead, and when closed what will the effect be on gross margin?
A)$3,000 underapplied, and increase 
B)$3,000 overapplied, and increase 
C)$3,000 underapplied, and decrease 
D)$3,000 overapplied, and decrease

Quizplus · Accepted Answer

The information provided suggests that there was an overapplication of Manufacturing Overhead. Therefore, the balance in Manufacturing Overhead would be $3,000 overapplied. When Manufacturing Overhead is closed, this will result in an increase in gross margin since the overapplied amount will be credited to Cost of Goods Sold.

Spectrum Manufacturing Had the Following Information in Its Records at the End