Manufacturing overhead is overapplied for the year by $3,000.The unadjusted cost of goods sold is $360,000.Closing manufacturing overhead into cost of goods sold will result in which of the following?
A) Adjusted cost of goods sold of $363,000.
B) A credit balance in manufacturing overhead of $6,000.
C) Adjusted cost of goods sold of $357,000.
D) Adjusted cost of goods sold of $360,000.

Question

Quizplus · Accepted Answer

Since manufacturing overhead is overapplied, it means that too much overhead costs were allocated to Work in Process inventory during the year. To adjust for this, we need to decrease the cost of goods sold by the amount of the overapplied overhead, resulting in a lower adjusted cost of goods sold. Therefore, the adjusted cost of goods sold would be $360,000 - $3,000 = $357,000. Choice A is incorrect because it suggests an increase in cost of goods sold. Choice B is incorrect because it suggests a credit balance in manufacturing overhead, which would not be correct given the overapplied amount. Choice D is incorrect because it suggests no adjustment was made for the overapplied overhead.

Manufacturing Overhead Is Overapplied for the Year by $3,000