Reference no: EM132810063

The following information relates to Wells Fargo for July 2008:

Actual direct labour costs $80 000

Actual direct labour rate per hour $8

Factory overhead rate per direct labour hour $12

Factory overhead incurred $160 000

Problem 1: Assuming underapplied or overapplied overhead is transferred to cost of goods sold at the end of the period, which of the following would be the entry to the cost of goods sold account?

Option 1: $80 000 debit

Option 2: $80 000 credit

Option 3: $40 000 credit

Option 4: $40 000 debit