Question
clappys Company has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Manufacturing overhead
clappys Company has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Manufacturing overhead cost and direct labor hours were estimated at $100,000 and 40,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of $5,000 in direct materials and $2,400 in direct labor. The labor rate is $6 per hour. Job #334 had 400 direct labor hours recorded on the job-cost sheet. By the end of the year, clappys had worked a total of 45,000 direct labor-hours and had incurred $125,000 actual manufacturing overhead cost. If Job #334 contained 200 units completed, the unit product cost on the completed job cost sheet would be:
clappys manufacturing overhead for the year was:
After calculating clappy Company's manufacturing overhead ending balance in the previous problem, which of the following statements is correct?
A. If Manufacturing Overhead is overapplied, when closing the ending balance in the manufacturing overhead account to COGS, the Applied side of the MOH account should be increased.
B. If Manufacturing Overhead is overapplied, when closing the ending balance in the manufacturing overhead account to COGS, the COGS account should be increased (debited), which decreases Net Income.
C. If Manufacturing Overhead is underapplied, when closing the ending balance in the manufacturing overhead account to COGS, the COGS account should be decreased (credited), which increases Net Income.
D. If Manufacturing Overhead is underapplied, after closing the ending balance in the manufacturing overhead account to COGS, the COGS is increased (debited), which decreases Net Income.
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