Answer:
(A) Underapplied (2,300)
(B)
Cost of Goods Sold debit 2,300
Factory Overhead credit 2,300
It increase their COGS by 2,300 Their Gross Profit will decrease by the same amount
Explanation:
(A)
227,550 / 12,300 = 18.5
<u>APPLIED </u><em>ACTUAL HOURS X RATE</em>
11,800 \times 18.5 = 218,300
<u>ACTUAL </u> (221,000)
Underapplied (2,300)
(B)
It increase their COGS by 2,300 Their Gross Profit will decrease by the same amount
Sales - COGS = Gross Profit
Sales - (COGS + 2,300 adjustment) = Gross Profit
Sales - Cogs - 2,300 = Gross Profit
The gross profit decreased 2,300