Refer to M2-12 for Fairfield Company.

1. Prepare the journal entry to close the Manufacturing Overhead account balance to Cost of Goods Sold.

2. Explain whether the entry in requirement 1 will increase or decrease Cost of Goods Sold and why.

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Item Description Total Cost $90,000 15,000 Direct materials Used on Jobs 101 and 102 Used on multiple jobs 750 hours @ $30 per hour 200 hours for Job 101 = Indirect materials Hourly labor wages $6,000 9,000 7,500 300 hours for Job 102 = 250 hours for Job 103 = Factory supervision Production engineer Factory janitorial work Selling, general, and administrative salaries Other manufacturing overhead costs (factory rent, insurance, depreciation, etc.) Other selling, general, and administrative costs (office rent, insurance, depreciation, etc.) 22,500 4,000 6,000 2,500 9,000 7,500 6,000