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Q8 Single choice

Personal Solutions manufactures nand-new personal computers and communications devices The company uses a Job-order costing system and applies manufacturing overhead to products on the oasis of machine hours The following estimates were used in preparing the predetermined overhead rate at the beginning of the year.

During the year, weak sales led to a reduction in production and a buildup or inventory Production records provided the following information.

Finished goods inventory included applied overhead of $100.000 while cost of goods sold included applied overhead of $300,000. There was no work-in-process inventory at year end how should the under-applied manufacturing overhead be handled at year end-

A
$12.500 of the under-applied manufacturing overhead should be charged to finished goods inventory and S37 500 should be charged to Cost of Goods Sold
B
All of the under-applied manufacturing overhead should be charged to Cost of Goods Sold for the year.
C
All of the under-applied manufacturing overhead should be earned over until the subsequent year and used to adjust the estimated predetermined rate for that year
D
$12.500 of the under-applied manufacturing overhead should be charged to finished goods inventory and S37.500 should be treated as a period cost

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