A) The actual manufacturing overhead incurred at Fraze Corporation during Novemb

ID: 2490961 • Letter: A

Question

A) The actual manufacturing overhead incurred at Fraze Corporation during November was $79,000, while the manufacturing overhead applied to Work in Process was $65,000. The Corporation's Cost of Goods Sold was $385,000 prior to closing out its Manufacturing Overhead account. The Corporation closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?

a. Manufacturing overhead for the month was underapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $399,000b.

b. Manufacturing overhead for the month was overapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $371,000

c. Manufacturing overhead for the month was overapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $399,000

d. Manufacturing overhead for the month was underapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $371,000

a. increase of $1,250

b. decrease of $16,000

c. decrease of $1,250

d. increase of $17,250

a. Net operating income would increase by $21,000 per year.

b. Net operating income would increase by $18,800 per year.

c. Net operating income would decrease by $123,000 per year.

d. Net operating income would decrease by $165,000 per year.

Explanation / Answer

Actual manufacturing overhead = $79,000

Applied =-65,000

Under applied =14,000

Manufacturing overhead

Actual

79,000

Applied

65,000

Cost of goods sold

14,000

Entry :

Cost of goods sold DR $14,000

To Manufacturing overhead $14,000

Hence cost of goods sold = 14,000 +385,000 = 399,000

B) Massing corporation

Increase in net income will be 150*115 = $17,250

Less increase in advertising budget = 16,000

Net increase in income = 1,250

Option a

C)Ramon Corporation

Buying cost = 18,000 * 23.30 = ($419,400)

Savings in cost

Direct materials 2.20

Direct labor 5.40

VOH 8.00

Salary 7.30

Total 22.90 *18,000 = 412,200

Saving in general overhead = 5,000

Additional segment margin = 21,000

Net income increase = 18,800

b. Net operating income would increase by $18,800 per year