Using the Following Information Assuming Overapplied Overhead Is Considered Material, Using the Preferred Method

question 2

Multiple Choice

Using the following information: $$\begin{array} { | l | l | } \hline \text { Cost of Goods Sold for the year } & \$ 840,000 \\\hline \text { Ending Finished Goods } & \$ 100,000 \\\hline \text { Ending Work in Process } & \$ 60,000 \\\hline \text { Overapplied manufacturing overhead } & \$ 40,000 \\\hline\end{array}$$ Assuming overapplied overhead is considered material, using the preferred method, what would be the adjustment to Cost of Goods Sold to close the overapplied overhead?

• A)A credit of $33,600.
• B)A debit of $40,000.
• C)A credit of $40,000.
• D)A debit of $33,600.

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Definitions:

Finished Goods

Items that are finished being manufactured and are prepared for sale.

Cost Classifications

This refers to the categorization of costs based on their nature, behavior, or decision-making needs, such as fixed vs. variable costs, direct vs. indirect costs, or product vs. period costs.

Sales Commission

A form of payment to a salesperson for selling a product or service, typically a percentage of the sale amount.

Product Cost

The total cost incurred to create a product, encompassing direct materials, direct labor, and overhead costs.