A company incurred actual manufacturing overhead in 2012 of $1,000,000. During 2012, the company applied

$1,100,000 of manufacturing overhead to jobs. Which of the following statements is true:

a. The adjustment made for over/under applied manufacturing overhead will increase cost of goods sold by $100,000 and

decrease net operating income by $100,000.

b. The adjustment made for over/under applied manufacturing overhead will increase finished goods by $100,000 and

decrease cost of goods sold by $100,000.

c. The adjustment made for over/under applied manufacturing overhead will decrease cost of goods sold and increase net

operating income by $100,000.

d. The adjustment made for over/under applied manufacturing overhead will decrease cost of goods sold by $100,000 but

have no effect on net operating income.

e. There will be no adjustment made for over/under applied manufacturing overhead.

Explain why and show work.