Question

Sanders Inc. has applied $567,988 of overhead to jobs in the cost ledger. Actual overhead at the end of the year is $575,000. The adjustment for over or underapplied overhead isa.$7,012 underapplied, decrease Cost of Goods Soldb.$7,012 overapplied, decrease Cost of Goods Soldc.$7,012 underapplied, increase Cost of Goods Soldd.$7,012 overapplied, increase Cost of Goods Sold

Answer 1

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