Question

The actual manufacturing overhead incurred at Hogans Corporation during April was $59,000, while the manufacturing overhead applied to Work in Process was $74,000. The company's Cost of Goods Sold was $289,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?
Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $274,000

Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $274,000

Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $304,000

Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $304,000

Answer 1

Answer:

Manufacturing overhead was over-applied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $274,000

Explanation:

Under / over applied manufacturing overhead = Applied Manufacturing overhead - Actual Manufacturing overhead

Over-applied manufacturing overhead =  $74,000 - $59,000

Over-applied manufacturing overhead =  $15,000

Cost of Goods Sold = $289,000 - $15,000 = $274,000

Manufacturing overhead are over-applied by $15,000 and cost of goods sold is $274,000.