Question

The Precision Widget Company had the following balances in their accounts at the end of the accounting period:

Work-in-Process $ 5,000
Finished Goods 20,000
Cost of Goods Sold 200,000

If their manufacturing overhead was overallocated by $8,000 and Precision Widget adjusts their accounts using a proration based on total ending balances, the revised ending balance for Cost of Goods Sold would be
a. $192,880.
b. $200,00.
c. $207,120.
d. $208,000.

Answer 1

The revised ending balance for Cost of Goods Sold, after prorating the overallocated manufacturing overhead, would be $208,000.

Step-by-step explanation:

To determine the revised ending balance for Cost of Goods Sold, we need to prorate the overallocated manufacturing overhead of $8,000 based on the total ending balances of Work-in-Process, Finished Goods, and Cost of Goods Sold.

The total ending balance for these accounts is $5,000 + $20,000 + $200,000 = $225,000. We can calculate the prorated amount by dividing the overallocated manufacturing overhead by the total ending balances and multiplying it by the ending balance of Cost of Goods Sold:

Revised ending balance for Cost of Goods Sold = $200,000 + (($8,000/$225,000) * $200,000) = $208,000.

Therefore, the revised ending balance for Cost of Goods Sold is $208,000.