Answer:
option (c) $7,012 underapplied, increase Cost of Goods
Explanation:
Data provided in the problem:
Applied overhead to the job = $ 567,988
Actual overhead at the end of the year = $ 575,000
Since the actual overhead at the end of the year is more than the overhead applied.
thus, the overhead is underapplied i.e less than the required.
Now, the amount of underapplied overhead is calculated as
= actual overhead - applied overhead
or
= $ 575,000 - $ 567,988 = $ 7012
also, the underapplied overhead will lead to the increase in the cost of the goods.
Hence,
the correct answer is option (c) $7,012 underapplied, increase Cost of Goods
