A company has $10,000 under-applied overhead at the end of a given period. The following information is given: Account Ending balance Overhead applied in the account Work-in-process $95,000 $30,000 Finished goods $85,000 $10,000 Cost of goods sold $120,000 $60,000 Manufacturing overhead control $110,000 Applied manufacturing overhead $100,000 The company uses the proration method to allocate the under-applied overhead to the above accounts. The accounting treatment to dispose of the under-applied overhead does which of the following? A. Decrease (credit) Cost of goods sold by $10,000 B. Increase (dedit) Cost of goods sold by $4,000 C. Increase (debit) Manufacturing overhead control by $110,000 D. Increase (debit) Cost of goods sold by $6,000 E. Increase (credit) Applied manufacturing overhead by $100,000
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
QUESTION 46
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A company has $10,000 under-applied
overhead at the end of a given period. The following information is given:Account Ending balance Overhead applied in the account
Work-in-process $95,000 $30,000Finished goods $85,000 $10,000
Cost of goods sold $120,000 $60,000
Manufacturing overhead control $110,000
Applied manufacturing overhead $100,000
The company uses the proration method to allocate the under-applied overhead to the above accounts. The accounting treatment to dispose of the under-applied overhead does which of the following?
A. Decrease (credit) Cost of goods sold by $10,000
B. Increase (dedit) Cost of goods sold by $4,000
C. Increase (debit) Manufacturing overhead control by $110,000
D. Increase (debit) Cost of goods sold by $6,000
E. Increase (credit) Applied manufacturing overhead by $100,000
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