Question

Matthias Corporation has provided data concerning the Corporation's Manufacturing Overhead account for the month of May. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $62,000 and the total of the credits to the account was $87,000. Which of the following statements is true?

Multiple Choice

• Manufacturing overhead for the month was underapplied by $25,000.

• Manufacturing overhead applied to Work in Process for the month was $87,000.

• Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $62,000.

• Actual manufacturing overhead incurred during the month was $87,000.

Answer 1

Under Manufactor overhead account :

We debit actual overhead incurred ( journal entry : MOH A/c Dr . To Cash A/c) and

We credit amount applied to Work in progress.

If Actual amount of overhead is more than applied amonut of overhead then we call ,overhead is underapplied.

If Actual amount of overhead is less than applied amonut of overhead then we call ,overhead is overapplied.

Here in this question ,

total debits to the Manufacturing Overhead account was $62,000 so we can say that actual manufactoring overhead expense was $62,000.

total crebits to the Manufacturing Overhead account was $87,000 so we can say that applid manufactoring overhead expense was $87,000.

So here , actual overhead is less than applied overhead , which means overhead of $25,000 are overapplied.

Now lets get to the answer:

1. Manufacturing overhead for the month was underapplied by $25,000.

This statement is False. Because Manufacturing overhead for the month was actally overapplied by $25,000 and not underapplied.

2.Manufacturing overhead applied to Work in Process for the month was $87,000.

This statement is true. Because The amount applied to WIP is shown on credit side of MOH A/c. and it is given in the question that $87,000 is on credit side of the account.

3.Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $62,000.

This statement is false. Because $62,000 is actal amount of manfuctoring overhead. And also MOH is transferred to WIP A/c and not finished goods account.

4. Actual manufacturing overhead incurred during the month was $87,000.

This statement is false. Because ,We debit actual overhead incurred ( journal entry : MOH A/c Dr . To Cash A/c) and so actual amount of overhead is $62,000.