Hampshire Co. produces two products: 9-volt batteries and AAA batteries. To assign manufacturing overhead to the two products, the company uses one single predetermined overhead rate for both products, and uses direct labor hours as the allocation base. The following data are given for year 2021:

Actual manufacturing overhead incurred during 2021	$400,000
Estimated manufacturing overhead (estimated before year 2021 started)	$375,000
Estimated activity level (estimated before year 2021 started)
9-volt battery	100,000 direct labor hours
AAA battery	400,000 direct labor hours
Actual activity level during 2021:
9-volt battery	125,000 direct labor hours
AAA battery	400,000 direct labor hours
Units produced during 2021:
9-volt battery	520,000 units
AAA battery	260,000 units

Hampshire disposes of over-/under-allocated overhead to cost of goods sold. What is the adjustment journal entry to dispose of the under-/over-allocated overhead to cost of goods sold?

DR Manufacturing Overhead $6,250

CR Cost of Goods Sold $6,250

DR Manufacturing Overhead $43,750

CR Cost of Goods Sold $43,750

DR Cost of Goods Sold $6,250

CR Manufacturing Overhead $6,250

DR Cost of Goods Sold $43,750

CR Manufacturing Overhead $43,750

What is the effect of the above adjustment journal entry on cost of goods sold?

The journal entry increases cost of goods sold by $43,750.

The journal entry reduces cost of goods sold by $6,250.

The journal entry reduces cost of goods sold by $43,750.

The journal entry increases cost of goods sold by $6,250.