Hubley Inc. uses a job-order costing system in which any underapplied or overapp

Question

Hubley Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month. The company has provided the following data for August Direct materials Direct labor cost Manufacturing overhead cost incurred Manufacturing overheed cost applied $74750 s 114,000 67930 $79,800 BeginningEnding Work in process Finished goods $24,000 $27475 $69,050$48,000 The cost of goods sold that appears on the income statement for August and that has been adjusted for any underapplied or overapplied overhead is closest to: O $274,255 O $297995 O $265,075 O $286.125

Explanation / Answer

Answer:

Total Manufacturing Cost incurred during the month of August = Direct Materials + Direct Labor + Manufacturing Overhead applied

Total Manufacturing Overhead incurred during the month of August = $74,750 + $114,000 + $79,800 = $268,550

Cost of Goods Manufactured = Beginning work in process + Manufacturing Overhead incurred - Ending Work in process

Cost of Goods Manufactured = $24,000 + $268,550 - $27,475 = $265,075

Unadjusted Cost of Goods sold = Beginning Finished Goods + Cost of Goods Manufactured - Ending Finished Goods

Unadjusted Cost of Goods sold = $69,050 + $265,075 - $48,000 = $286,125

Manufacturing Overhead incurred = $67,930

Manufacturing Overhead applied = $79,800

Overapplied Overhead = $79,800 - $67,930 = $11,870

Cost of Goods sold = Unadjusted Cost of Goods sold - Overapplied Overhead

Cost of Goods sold = $286,125 - $11,870

Cost of Goods sold = $274,255

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