Problem - Ortega Company uses a job-order costing system. During a year, the firm applied $280,000 of manufacturing overhead in total. At the end of the year, actual manufacturing overhead was determined to be $260,000. The following data pertain to ending account balances.
Cost of Goods Sold $200,000
Finished Goods Inventory 150,000
Raw Materials Inventory 100,000
Work in process Inventory 50,000
a. Assume that Ortega closes underapplied or overapplied overhead into cost of goods sold. What is the final (i.e adjusted) balance in cost of goods sold?
b. Calculate adjusted COGS if Ortega prorates over or underapplied overhead.