Question

Before prorating the manufacturing overhead costs at the end of 2020, the Cost of Goods Sold and Finished Goods Inventory accounts had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2020. If the under- or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, what will be the Cost of Goods Sold balance after the proration

Answer 1

Answer:

COGS will decrease by 2,597 dollars as will decrease by the proration of the factory overhead

Explanation:

we do cross mutiplication to solve for the COGS and FG based on actual overhead

             applied                actual

COGS     57,500               54,903     *A

FG          20,000               19,067     *B

Total       77, 500               74,000

*A)   57,500 x  74,000/77,500 = 54,903

*B)   20,000 x 74,000/77,500 =  19,097

Decrease in COGS 57,500 - 54,903 = 2,597