Question

Sanders Inc. has applied $567,988 of overhead to jobs. Actual overhead at the end of the year is $575,000. The adjustment for over- or underapplied overhead is a.$7,012 overapplied, decrease Cost of Goods Sold b.$7,012 underapplied, decrease Cost of Goods Sold c.$7,012 underapplied, increase Cost of Goods Sold d.$7,012 overapplied, increase Cost of Goods Sold

Answer 1

Answer:

Option (c) is correct.

Explanation:

Given that,

Applied overhead to jobs = $567,988

Actual overhead at the end of the year = $575,000

Hence,

Underapplied overhead:

= Actual overhead at the end of the year - Applied overhead to jobs

= $575,000 - $567,988

= $7,012

Therefore, the adjustment for underapplied overhead is a $7,012 underapplied which increases the Cost of Goods Sold.