Fletcher Company disposes of under- or over-applied overhead at year-end as an
adjustment to cost of goods sold. Prior to disposal, the firm reported cost of
goods sold of $590,000 in a year when manufacturing overhead was
under-applied by $15,000. If sales revenue totaled $1,400,000, determine

(1) Fletcher’s adjusted cost of goods sold and

(2) gross margin.
Adjusted Cost Gross Margin
of Goods Sold
A. $575,000 $810,000
B. $575,000 $825,000
C. $590,000 $810,000
D. $605,000 $795,000
E. $605,000 $810,000