At the end of the last fiscal year, Wingate Company had the following account balances: Overapplied overhead P 9,000 Cost of Goods Sold P860,000 Work in Process Inventory P 36,000 Finished Goods Inventory P 74,000 If the most common treatment of assigning overapplied overhead were used, the final balance in Cost of Goods Sold is

Ans: Overapplied overheads is a situation where acutual overheads incurred are less than the overheads charged to production.

Generally overapplied overheads are adjusted from cost of goods sold account instead of each inventory account.

Although work in progress and finished goods are still there but companies generally adjust only cost of goods sold. Adjusting each inventory for any small overhead adjustment is not a proper use of managerial accounting of efforts and time.

All inventory appear in cost of goods sold sooner or later therefore so common treatment is to adjust cost of goods sold.

Then final balance of cost of goods sold = P860,000 - P9,000 = P851,000 Ans.