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 $60,000 and the total of the credits to the account was $83,000. Which of the following statements is true? A.Manufacturing overhead for the month was underapplied by $23,000.

B.Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $60,000. C.Actual manufacturing overhead incurred during the month was $83,000.
D.Manufacturing overhead applied to Work in Process for the month was $83,000.

Answer 1

The correct answer is D, which indicates that the Manufacturing overhead applied to Work in Process for the month was $83,000. This means that overhead was overapplied by $23,000, not underapplied, making the other options incorrect.

Step-by-step explanation:

The correct statement regarding Matthias Corporation's Manufacturing Overhead account for the month of May is D. Manufacturing overhead applied to Work in Process for the month was $83,000. This can be deduced because the total credits to the Manufacturing Overhead account represent the overhead applied to Work in Process (the allocation based on the predetermined overhead rate), and the total debits represent the actual overhead costs incurred. Therefore, if the credits are greater than the debits, it indicates that the overhead was overapplied. Specifically, the overhead was overapplied by the difference of $23,000 ($83,000 credits - $60,000 debits), which contradicts option A.

Furthermore, there's no direct information provided about how much manufacturing overhead was transferred from Finished Goods to Cost of Goods Sold during the month, making option B incorrect. Option C is also incorrect because it confuses the actual incurred overhead with the applied amount.

Understanding overhead costs is essential in accounting and business, as they are indirectly tied to manufacturing but are necessary for the operation. Overhead costs typically include expenses such as rent, utilities, and salaries of employees who support the manufacturing process.