Please provide instructions on solving this. The answer was $810,000 but I do no

Question

Please provide instructions on solving this. The answer was $810,000 but I do not know how to get it.

Hardin company's manufacturing overhead account showed a $20,000 underapplied overhead balance on December 31. Other data as of December 31 appear below:

Cost of goods sold...................................................................................$800,000
Overhead applied during the year included in cost of goods sold...........$200,000
Overhead applied during the year in the ending balances of:
....Work in process inventory....................................................................$80,000
....Finished goods inventory......................................................................$120,000

If the company allocates the underapplied overhead among cost of goods sold and the appropriate inventory accounts based on the amount of overhead applied during the year in the accounts, cost of goods sold after allocation will be:

Explanation / Answer

Hi, See the overhead costs has been applied to 3 items: Cost of goods sold = 200000 Work in process = 80000 finsihed goods = 120000 So the allocation of overhead costs in the above there items = 200000:80000:120000 = 20:8:12 So to allocate further overhead of 20000 to cost of goods sold, total amount to be allocated should be = 20000/40*20 = 10000 answer So total cost of goods sold would be = 800000 + 10000 = 810000 Happy to help

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