Question

5. Molano Corporation has provided the following data concerning manufacturing overhead for June: Actual manufacturing overhead incurred..... $69,000 Manufacturing overhead applied to jobs...... $76,000 The company's Cost of Goods Sold was $255,000 prior to adjusting for any underapplied or overapplied overhead. Which of the following statements is true? A. Manufacturing overhead was underapplied by $7,000; Cost of Goods Sold after adjusting for any underapplied or overapplied overhead is $248,000 B. Manufacturing overhead was overapplied by $7,000; Cost of Goods Sold after adjusting for any underapplied or overapplied overhead is $248,000 C. Manufacturing overhead was underapplied by $7,000; Cost of Goods Sold after adjusting for any underapplied or overapplied overhead is $262,000 D. Manufacturing overhead was overapplied by $7,000; Cost of Goods Sold after adjusting for any underapplied or overapplied overhead is $262,000

Answer 1

Correct option is "B"-Manufacturing overhead was over-applied by 7000 ,cost of goods sold after adjusting for any under-applied or over-applied overhead is 248000

Since Actual overhead is less than overhead applied ,It means overhead is over-applied by

Actual -Applied

69000 -76000

7000

Over-applied will be closed to cost of goods sold thereby reducing the cost of goods sold .

Cost of goods sold after adjustment = 255000 -7000 = 248000