Before prorating the manufacturing overhead costs at the end of 2020, the Cost of Goods Sold and Finished Goods Inventory accounts had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2020. If the under - or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, what will be the Cost of Goods Sold balance after the proration

Question

Business

Munoz

16 March, 00:02

Before prorating the manufacturing overhead costs at the end of 2020, the Cost of Goods Sold and Finished Goods Inventory accounts had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2020. If the under - or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, what will be the Cost of Goods Sold balance after the proration

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Answers (1)

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Aubree Burch · Answer 1

COGS will decrease by 2,597 dollars as will decrease by the proration of the factory overhead

Explanation:

we do cross mutiplication to solve for the COGS and FG based on actual overhead

applied actual

COGS 57,500 54,903 * A

FG 20,000 19,067 * B

Total 77, 500 74,000

*A) 57,500 x 74,000/77,500 = 54,903

*B) 20,000 x 74,000/77,500 = 19,097

Decrease in COGS 57,500 - 54,903 = 2,597