In the Vasquez Company, any over- or underapplied overhead is closed out to Cost of Goods Sold. Last year, the company incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of overhead cost to jobs. The beginning and ending balances of Finished Goods were equal, and the Company”s Cost of Goods Manufactured for the year totaled $71,000. Given this information, Cost of Goods Sold, after adjustment for any over- or underapplied overhead, for the year must have been:<\/p>\n\n\n\n
A) $98,000<\/p>\n\n\n\n
B) $73,000<\/p>\n\n\n\n
C) $71,000<\/p>\n\n\n\n
D) $69,000<\/p>\n\n\n\n
The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n The correct answer is D) $69,000<\/strong>.<\/p>\n\n\n\n In order to calculate the adjusted Cost of Goods Sold (COGS)<\/strong>, we need to account for any over- or underapplied manufacturing overhead. The company applies overhead to jobs based on a predetermined rate, and any difference between the actual overhead incurred and the overhead applied to jobs needs to be closed out to COGS<\/strong>.<\/p>\n\n\n\n We are told that:<\/p>\n\n\n\n To find whether the company has overapplied or underapplied overhead, we subtract the actual from the applied:<\/p>\n\n\n\n [ Since the applied overhead is higher than the actual overhead, this means the company has overapplied<\/strong> its overhead by $2,000.<\/p>\n\n\n\n According to the information provided, any overapplied or underapplied overhead is closed out to Cost of Goods Sold<\/strong>. Since the company has overapplied its overhead by $2,000, the COGS must be reduced<\/strong> by that amount.<\/p>\n\n\n\n We are also told that the Cost of Goods Manufactured (COGM)<\/strong> for the year is $71,000. Since the beginning and ending balances of Finished Goods are the same, the COGS before the adjustment is equal to the COGM.<\/p>\n\n\n\n Thus, the unadjusted COGS<\/strong> is $71,000.<\/p>\n\n\n\n Now, we adjust the COGS for the overapplied overhead:<\/p>\n\n\n\n [ Therefore, the adjusted Cost of Goods Sold<\/strong> for the year is $69,000<\/strong>.<\/p>\n\n\n\n Thus, the correct answer is D) $69,000<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":" In the Vasquez Company, any over- or underapplied overhead is closed out to Cost of Goods Sold. Last year, the company incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of overhead cost to jobs. The beginning and ending balances of Finished Goods were equal, and the Company”s Cost of Goods Manufactured for the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-185750","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/185750","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=185750"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/185750\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=185750"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=185750"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=185750"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Explanation:<\/h3>\n\n\n\n
Step 1: Determine the over- or underapplied overhead.<\/h4>\n\n\n\n
\n
\\text{Over- or Underapplied Overhead} = \\text{Applied Overhead} – \\text{Actual Overhead} = 29,000 – 27,000 = 2,000
]<\/p>\n\n\n\nStep 2: Adjust COGS.<\/h4>\n\n\n\n
\\text{Adjusted COGS} = \\text{Unadjusted COGS} – \\text{Overapplied Overhead}
]
[
\\text{Adjusted COGS} = 71,000 – 2,000 = 69,000
]<\/p>\n\n\n\n