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Asked by Hunain Nadeem on May 21, 2024

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Faughn Corporation has provided the following data concerning manufacturing overhead for July: Faughn Corporation has provided the following data concerning manufacturing overhead for July: The company's Cost of Goods Sold was $243,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true? A) Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000 B) Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000 C) Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $253,000 D) Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $253,000 The company's Cost of Goods Sold was $243,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?

A) Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000
B) Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000
C) Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $253,000
D) Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $253,000

Manufacturing Overhead

All manufacturing costs other than direct materials and direct labor, including costs related to running the factory.

Underapplied Overhead

A situation in which the allocated manufacturing overhead costs are less than the actual overhead incurred, leading to a variance in costing.

Overapplied Overhead

A situation where the allocated manufacturing overhead costs exceed the actual overhead costs incurred, leading to adjustments in financial reporting.

  • Familiarize yourself with the notion of cost of goods sold (COGS) and the adjustments associated with it.
  • Examine and determine the influence of underapplied or overapplied manufacturing overhead on the Cost of Goods Sold.
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Alexandria SimoneMay 22, 2024
Final Answer :
B
Explanation :
The total manufacturing overhead cost incurred in July was $253,000 ($180,000 actual + $73,000 applied). However, the Manufacturing Overhead account was closed out to Cost of Goods Sold with a balance of $263,000 ($253,000 actual + $10,000 overapplied). Therefore, Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000 ($243,000 - $10,000 overapplied).

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