Question

When underapplied or overapplied manufacturing overhead is prorated, amounts can be assigned to which of the following accounts? Multiple Choice

a. Raw-Material Inventory, Manufacturing Overhead, and Direct Labor.
b. Cost of Goods Sold, Work-in-Process Inventory, and Finished-Goods Inventory.
c. Work-in-Process Inventory, Raw-Material Inventory, and Cost of Goods Sold.
d. Raw-Material Inventory, Finished-Goods Inventory, and Cost of Goods Sold.
e. Raw-Material Inventory, Work-in-Process Inventory, and Finished-Goods Inventory.

Answer 1

b. Cost of Goods Sold, Work-in-Process Inventory, and Finished-Goods Inventory.

Step-by-step explanation:

Whenever manufacturing overheads are prorated and under-applied or over-applied, then they are charged to inventory or cost which includes overheads as part of it.

As for instance, raw material inventory do not include any overheads, it is just the purchase price of inventory, as no work is performed on it.

Cost of goods sold, includes all the cost incurred to sale the good, from acquiring raw material to converting finished goods, and then adding the sales expense the goods are sold.

Finished goods include every material and overhead to convert the item into finished state and usable state.

Work in process is half way completed, or the percentage prescribed and includes raw material, includes overheads, but the product is somewhere more than raw inventory and less than finished good.

Therefore, correct option is:

b.