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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Business

Gill

8 September, 23:22

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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Ricardo Robles · 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