Priscilla Has the Following Inventory Information

question 116

Multiple Choice

Priscilla has the following inventory information. A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is

• A) $1,280.
• B) $1,287
• C) $1,306.
• D) $1,330.

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Definitions:

Underapplied

A situation where the allocated manufacturing overhead costs are less than the actual overhead costs incurred, leading to underestimation of product costs.

Overapplied

A condition where the allocated amount of indirect costs exceeds the actual amount incurred.

Variable Overhead Efficiency

The variance indicating the efficiency with which a variable overhead cost is incurred in relation to an activity level, such as machine or labor hours.

Rate Variance

The difference between the actual rate paid for an item or service and the expected (standard) rate, used in budgeting and cost control.