Morrow Corporation had only one job in process during May—Job X32Z—and had no fi

Question

Morrow Corporation had only one job in process during May—Job X32Z—and had no finished goods inventory on May 1. Job X32Z was started in April and finished during May. Data concerning that job appear below:        

In May, overhead was overapplied by $300. The company adjusts its cost of goods sold every month for the amount of the overhead that was underapplied or overapplied.

Required:

1. Using the direct method, what is the cost of goods sold for May?

2. What is the total value of the finished goods inventory at the end of May?

3. What is the total value of the work in process inventory at the end of May?

Job X32Z Beginning balance $ 5,000 Charged to the job during May Direct materials $ 8,000 Direct labor $ 2,000 Manufacturing overhead applied $ 4,000 Units completed 100 Units in process at the end of May 0 Units sold during May 40

Explanation / Answer

1 Computation of cost of goods sold for the month of May: Schedule of Cost of Goods Sold - Direct method Beginning balance $5,000 Add: Direct materials $8,000 Add: Direct labor $2,000 Add: Manufacturing overhead Applied $4,000 (a) Total $19,000 (b) Units completed 100 (c) Unit product cost [(a) / (b)] $190 (d) Units sold 40 Unadjusted Cost of goods sold [(c) X (d)] $7,600 Less: Overapplied overheads $300 Cost of goods sold $7,300 2 Computation of total value of Finished goods inventory at the end of May: Finished goods inventory = (Units Completed - Units sold) X Unit product cost = (100 - 40) X 190 = $     11,400 3 Computation of total value of Work in process inventory at the end of May: Total value of Work in process inventory = 0

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