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 $59,400 and $39,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $93,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $98,400 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
a.$913.
b.$1,228.
c.$2,637.
d.$955

Answer 1

Answer:

$2140.24 (There is no answer in Options Provided)

Explanation:

The explanation is attached

Answer 2

Answer:

the Cost of Goods Sold balance after the proration is $56,140 (none of the suggested solutions)

Explanation:

Step 1 Consider whether there was an Over or Under Application of Overheads.

Applied Manufacturing Overhead $98,400 > Actual Manufacturing Overhead $93,000

Overheads were thus Over-Applied by $5,400

Step 2 Allocate the Over- Application of Overheads to Closing Inventory in proportion to their weightings

Item                                                             Total         Weight %      Allocation

Cost of Goods Sold                                 $59,400        60.37%        3,260

Finished Goods Inventory accounts      $39,000         39.63%        2,140

Total                                                         $98,400       100.00%        5,400

Balances after allocation :

Cost of Goods Sold = $59,400 - $3,260 = $56,140