Which of the following is correct with respect toTime left 1:59:07closing out underapplied manufacturing overhead toCost of Goods Sold versus closing it out to Work-in-Process Inventory, Finished Goods Inventory, and Costof Goods Sold?а.Cost of Goods Sold will be higher if theunderapplied overhead is closed out byallocating it to the inventory accounts as wellas to Cost of Goods Sold.O b. The balance in the Work-in-Process accountafter allocation will be the same under eithermethod.O c. Operating income will be higher if all of theunderapplied overhead is closed out to Cost ofGoods Sold.d. The balance in the Work-in-Process accountafter allocation will be higher if theunderapplied overhead is closed out byallocating it to all appropriate accounts.e.None of given answer is correct.

Underapplied manufacturing overheads will be closed out by either debiting Cost of Goods Sold or by…

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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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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Which of the following is correct with respect to
Time left 1:59:07
closing out underapplied manufacturing overhead to
Cost of Goods Sold versus closing it out to Work-in-
Process Inventory, Finished Goods Inventory, and Cost
of Goods Sold?
а.
Cost of Goods Sold will be higher if the
underapplied overhead is closed out by
allocating it to the inventory accounts as well
as to Cost of Goods Sold.
O b. The balance in the Work-in-Process account
after allocation will be the same under either
method.
O c. Operating income will be higher if all of the
underapplied overhead is closed out to Cost of
Goods Sold.
d. The balance in the Work-in-Process account
after allocation will be higher if the
underapplied overhead is closed out by
allocating it to all appropriate accounts.
e.
None of given answer is correct.

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