Goodman Company Has $30,000 in Underapplied Overhead, Which Is Considered

question 36

Multiple Choice

Goodman Company has $30,000 in underapplied overhead, which is considered by the company to be a material amount. Other account balances include:

Work in Process Inventory $140,000
Finished Goods Inventory 40,000
Cost of Goods Sold 20,000
Which one of the following would be the correct journal entry for closing the underapplied overhead?

• A)Work in Process Inventory 21,000
• Finished Goods Inventory 6,000
• Cost of Goods Sold 3,000
• Manufacturing Overhead 30,000
• B)Manufacturing Overhead 30,000
• Work in Process Inventory 21,000
• Finished Goods Inventory 6,000
• Cost of Goods Sold 3,000
• C)Manufacturing Overhead 30,000
• Work in Process Inventory 10,000
• Finished Goods Inventory 10,000
• Cost of Goods Sold 10,000
• D)Work in Process Inventory 10,000
• Finished Goods Inventory 10,000
• Cost of Goods Sold 10,000
• Manufacturing Overhead 30,000
• E)None of the answer choices is correct

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Definitions:

Marginal Cost

The additional cost incurred by producing one more unit of a product or service, used in determining optimal production levels.

Short-Run Capacity

Refers to the maximum output a firm can produce under a given set of fixed and variable inputs within a short period.

Average Variable Cost

Average variable cost is the total variable cost divided by the quantity of output, showing the cost of producing one more unit of a good.

Marginal Product

The additional output produced by using one more unit of a given input, holding all other inputs constant.