Question

Sagon Corporation has provided data concerning the Corporation's Manufacturing Overhead account for the month of September. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $101,000 and the total of the credits to the account was $69,000. Which of the following statements is true?

Multiple Choice

• Manufacturing overhead applied to Work in Process for the month was $101,000.

• Manufacturing overhead for the month was underapplied by $32,000.

• Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $101,000.

• Actual manufacturing overhead incurred during the month was $69,000.

Answer 1

Answer is second option - manufacturing overhead for the month was under-applied by $32,000

Actual manufacturing overhead incurred during the month was $101,000 and manufacturing overhead applied to work in process during the month was $69,000. Since the manufacturing overhead applied is lower than actual incurred there is under applied manufacturing overhead by $32,000. This under-applied manufacturing overhead has to be closed to cost of goods sold account.