Question

The actual manufacturing overhead incurred at Gutekunst Corporation during March was $53,000, while the manufacturing overhead applied to Work in Process was $73,000. The Corporation's Cost of Goods Sold was $451,000 prior to closing out its Manufacturing Overhead account. The Corporation closes out its Manufacturing Overhead account to Cost of Goods Sold. Which 30 0105:10of the following statements is true?
A) Manufacturing overhead was overapplied by $20,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $471,000
B) Manufacturing overhead was overapplied by $20,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $431,000
C) Manufacturing overhead was underapplied by $20,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $431,000
D) Manufacturing overhead was underapplied by $20,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $471,000

Answer 1

Answer:

B. Manufacturing overhead was overapplied by $20,000; Cost of goods sold after closing the manufacturing overhead account is $431,000.

Explanation:

Manufacturing overhead refers to the factors or conditions that keeps a facotry running. These include electricity, deprecaition on factory, etc.

In the case of the queetion above, the manufacturing overhead has been over applied by $20,000 (i.e: $73,000 - $53,000). This over application of the manufacturing overhead has also affected the cost of goods sold after closing out the manufacturing overhead account

Since the overapplied amount is $20,000, we deduct the overapplied amount from the cost of sales ($471,000) to get the actual costs of goods sold after closing out the manufacturing overhead account.

We then have ($451,000 - $20,000) = $431,000.

Therefore, the cost of goods sold after closing the manufacturing overhead account is $431,000.

Cheers.