Question

In 2019, the Creighton Agricultural Products Company used a predetermined manufacturing overhead rate of 150% times direct labor cost. Information for the year is as follows: Actual direct materials cost $812,500 Actual direct labor cost $180,000 Actual overhead costs incurred: $264,000 Total direct labor hours 5,520 What is the amount of the adjustment to COGS required due to the over or under allocation of overhead costs. Select one: a. $4,300 b. $5,900 c. $6,000 d. None of the choices

Answer 1

Answer:

c. $6,000

Explanation:

The computation of the amount of the adjustment required to cost of goods sold is shown below:

Estimated manufacturing overhead cost is

= 150% × $180,000

= $270,000

And, the actual overhead cost incurred is $264,000

So, the adjustment amount is

= $270,000 - $264,000

= $6,000

Hence, the correct option is c. $6,000