The Mystic Manufacturing Company's Factory Overhead T-account at the end of the fiscalyear shows Actual Overhead in the amount of $450,000 and Allocated Overhead in theamount of $480,000.REQUIRED: Which of the following is true in describing this Accounting scenario?A) Overhead is under-applied by $30,000 and the journal entry to close out MOH would requiredebiting Cost of Goods Sold (COGS)B) Overhead is under-applied by $30,000 and the journal entry to close out MOH would requirecrediting Cost of Goods Sold (COGS).C) Overhead is over-applied by $30,000 and the journal entry to close out MOH would requiredebiting Cost of Goods Sold (COGS).D) Overhead is over-applied by $30,000 and the journal entry to close out MOH would requirecrediting Cost of Goods Sold (COGS).

Overhead means the cost incurred indirect in factory for the production of goods. Manufacturing…

The Mystic Manufacturing Company's Factory Overhead T-account at the end of the fiscal year shows Actual Overhead in the amount of $450,000 and Allocated Overhead in the amount of $480,000. REQUIRED: Which of the following is true in describing this Accounting scenario? A) Overhead is under-applied by $30,000 and the journal entry to close out MOH would reqir debiting Cost of Goods Sold (COGS) B) Overhead is under-applied by $30,000 and the journal entry to close out MOH would requir crediting Cost of Goods Sold (COGS). C) Overhead is over-applied by $30,000 and the journal entry to close out MOH would require debiting Cost of Goods Sold (COGS). D) Overhead is over-applied by $30,000 and the journal entry to close out MOH would require crediting Cost of Goods Sold (COGS).

The Mystic Manufacturing Company's Factory Overhead T-account at the end of the fiscal year shows Actual Overhead in the amount of $450,000 and Allocated Overhead in the amount of $480,000. REQUIRED: Which of the following is true in describing this Accounting scenario? A) Overhead is under-applied by $30,000 and the journal entry to close out MOH would reqir debiting Cost of Goods Sold (COGS) B) Overhead is under-applied by $30,000 and the journal entry to close out MOH would requir crediting Cost of Goods Sold (COGS). C) Overhead is over-applied by $30,000 and the journal entry to close out MOH would require debiting Cost of Goods Sold (COGS). D) Overhead is over-applied by $30,000 and the journal entry to close out MOH would require crediting Cost of Goods Sold (COGS).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Richie Manufacturing had underapplied overhead of $42,000 in 20X0. Before adjusting for overapplied or underapplied overhead, the ending inventories for direct materials, WIP, and finished goods were $71,000, $161,000, and $138,000, respectively. Unadjusted cost of goods sold was $276,000. 1. Assume that the $42,000 was written off solely as an adjustment to cost of goods sold. Compute the adjusted cost of goods sold. 2. Management has decided to prorate the $42,000 to the appropriate accounts (using the unadjusted ending balances) instead of writing it off solely as an adjustment of cost of good sold. Would gross profit be highter or lower than in requirement 1? By how much?